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Regime dependent causality : equity and credit markets

Bhar, Ramaprasad, Colwell, David B. and Wang, Peipei 2012, Regime dependent causality : equity and credit markets, International journal of financial markets and derivatives, vol. 3, no. 1, pp. 36-44.

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Title Regime dependent causality : equity and credit markets
Author(s) Bhar, Ramaprasad
Colwell, David B.
Wang, Peipei
Journal name International journal of financial markets and derivatives
Volume number 3
Issue number 1
Start page 36
End page 44
Total pages 9
Publisher Inderscience Publishers
Place of publication Olney, England
Publication date 2012
ISSN 1756-7130
Keyword(s) regime dependence
credit default swaps
CDS options
equity
implied volatility
credit markets
Markov switching model
stock market volatility
Summary We apply a Markov switching model to investigate the possibility of an asymmetric causal relationship between the volatility process inferred from the iTraxx CDS options market and the implied volatility from the stock index options market. We find strong evidence that the stock market leads the CDS market and the effect of the implied stock market volatility is more significant during the volatile regime. We also find that a large jump in the stock return, up or down, may indeed be followed by a regime shift.
Language eng
Field of Research 150201 Finance
Socio Economic Objective 900102 Investment Services (excl. Superannuation)
HERDC Research category C1 Refereed article in a scholarly journal
Persistent URL http://hdl.handle.net/10536/DRO/DU:30052758

Document type: Journal Article
Collections: Faculty of Business and Law
School of Accounting, Economics and Finance
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Created: Fri, 31 May 2013, 17:28:34 EST by Aysun Alpyurek

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