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dc.contributor.authorJarrow, R.*
dc.contributor.authorLi, H.*
dc.contributor.authorYe, Xiaoxia*
dc.contributor.authorHu, M.*
dc.date.accessioned2018-05-01T14:43:56Z
dc.date.available2018-05-01T14:43:56Z
dc.date.issued2019-02
dc.identifier.citationJarrow R, Li H, Ye X et al (2018) Exploring mispricing in the term structure of CDS spreads. Review of Finance. 23(1): 161-198.en_US
dc.identifier.urihttp://hdl.handle.net/10454/15730
dc.descriptionYesen_US
dc.description.abstractBased on a reduced-form model of credit risk, we explore mispricing in the CDS spreads of North American companies and its economic content. Specifically, we develop a trading strategy using the model to trade out of sample market-neutral portfolios across the term structure of CDS contracts. Our empirical results show that the trading strategy exhibits abnormally large returns, confirming the existence and persistence of a mispricing. The aggregate returns of the trading strategy are positively related to the square of market-wide credit and liquidity risks, indicating that the mispricing is more pronounced when the market is more volatile. When implemented on the Markit data, the strategy shows significant economic value even after controlling for realistic transaction costs.en_US
dc.language.isoenen_US
dc.relation.isreferencedbyhttps://doi.org/10.1093/rof/rfy014
dc.rights(c) The Author(s) 2018. Published by Oxford University Press on behalf of the European Finance Association. All rights reserved. For permissions, please email: journals.permissions@oup.com
dc.subjectCredit default swapsen_US
dc.subjectMispricingen_US
dc.subjectStatistical arbitrageen_US
dc.subjectAffine modelsen_US
dc.subjectMarket-neutral strategyen_US
dc.subjectHedge fundsen_US
dc.titleExploring mispricing in the term structure of CDS spreadsen_US
dc.status.refereedYesen_US
dc.date.Accepted2018-03-14
dc.date.application2018-05-08
dc.typeArticleen_US
dc.type.versionAccepted Manuscripten_US
refterms.dateFOA2018-07-25T11:18:21Z


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