IDEAS home Printed from https://ideas.repec.org/p/chf/rpseri/rp1324.html
   My bibliography  Save this paper

Credit Variance Swaps and Volatility Indexes

Author

Listed:
  • Antonio Mele

    (USI Università della Svizzera italiana; Swiss Finance Institute; Centre for Economic Policy Research (CEPR))

  • Yoshiki Obayashi

    (Applied Academics LLC)

Abstract

Credit volatility correlates quite modestly with equity volatility. Currently, only backward-looking indexes for credit volatility exist. We derive model-free indexes of expected CDS index spread volatility that rely on CDS index option prices, which reect the fair value of dedicated credit variance swaps that are forward-looking in nature. We consider both percentage and basis point expected volatility, and show that basis point volatility can be priced in a model- free format even in the presence of jumps.

Suggested Citation

  • Antonio Mele & Yoshiki Obayashi, 2013. "Credit Variance Swaps and Volatility Indexes," Swiss Finance Institute Research Paper Series 13-24, Swiss Finance Institute.
  • Handle: RePEc:chf:rpseri:rp1324
    as

    Download full text from publisher

    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2255585
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mele, Antonio & Obayashi, Yoshiki & Shalen, Catherine, 2015. "Rate fears gauges and the dynamics of fixed income and equity volatilities," Journal of Banking & Finance, Elsevier, vol. 52(C), pages 256-265.
    2. Li, Shaoyu & Zhang, Yuanyuan & Zhu, Chunhui, 2021. "A closed-form exact solution for pricing fixed-income variance swaps with affine-jump model," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).

    More about this item

    Keywords

    Credit Default Swap Volatility; Credit Variance Swaps; Model-Free Pricing; VIX Index; Basis Point Variance; Quadratic Contracts;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:chf:rpseri:rp1324. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ridima Mittal (email available below). General contact details of provider: https://edirc.repec.org/data/fameech.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.