Do Equity Markets Favor Credit Market News Over Options Market News?

Antje Berndt and Anastasiya Ostrovnaya

No 2007-E12, GSIA Working Papers from Carnegie Mellon University, Tepper School of Business

Abstract: Both credit default swap (CDS) and options markets often experience abnormal swings prior to the announcement of negative credit news. With the exclusion of negative earnings announcements, we find that options prices reveal information about such forthcoming adverse events at least as early as do credit spreads. Prior to negative credit news being publicly disclosed, we find that the equity market does not respond to abnormal movement in options prices unless that information has also manifested itself in the CDS market. A potential explanation is that options are more likely to trade on unsubstantiated rumors than are default swaps.

References: Add references at CitEc
Citations:

Downloads: (external link)
https://student-3k.tepper.cmu.edu/gsiadoc/wp/2007-E12.pdf
Our link check indicates that this URL is bad, the error code is: 401 Unauthorized

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cmu:gsiawp:1175522776

Ordering information: This working paper can be ordered from
https://student-3k.t ... /gsiadoc/GSIA_WP.asp

Access Statistics for this paper

More papers in GSIA Working Papers from Carnegie Mellon University, Tepper School of Business Tepper School of Business, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, PA 15213-3890.
Bibliographic data for series maintained by Steve Spear ().