Firm-Specific Risk-Neutral Distributions with Options and CDS

• 成果类型: Article
• 署名作者: Aramonte, Sirio; Jahan-Parvar, Mohammad R.; Rosen, Samuel; Schindler, John W.
• 署名单位: Bank for International Settlements (BIS); Federal Reserve System - USA; Federal Reserve System Board of Governors; Pennsylvania Commonwealth System of Higher Education (PCSHE); Temple University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2021.4170
• 发表日期: 2022
• 页码: 7018-7033
• 关键词: risk-neutral distributions; investor expectations; CDS spreads

摘要

We propose a method to extract the risk-neutral distribution of firm-specific stock returns using both options and credit default swaps (CDS). Options and CDS provide information about the central part and the left tail of the distribution, respectively. Taken together, but not in isolation, options and CDS span the intermediate part of the distribution, which is driven by exposure to the risk of large, but not extreme, returns. Through a series of asset-pricing tests, we show that this intermediate-return risk carries a premium, particularly at times of heightened market stress.