EconPapers    
Economics at your fingertips  
 

Same firm, two volatilities: How variance risk is priced in credit and equity markets

Arben Kita and Daniel Tortorice ()

Journal of Corporate Finance, 2021, vol. 69, issue C

Abstract: Variance risk premia (VRP) based on equity and credit market information for the same firm differ substantially in magnitude. VRP is strongly dependent on firm characteristics. Higher-leveraged and larger firms have lower VRP. The smirk in the plot of VRP vs. leverage is higher for low-levered firms than for high-levered firms. This smirk is more pronounced in the credit market than in the equity market. VRP, and especially credit VRP, correlates with higher future returns and is a priced source of risk in both markets.

Keywords: Variance risk premia; Implied volatility; Realized volatility; CDS; Stocks (search for similar items in EconPapers)
JEL-codes: C58 G12 G13 G40 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0929119921000055
Full text for ScienceDirect subscribers only

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:eee:corfin:v:69:y:2021:i:c:s0929119921000055

DOI: 10.1016/j.jcorpfin.2021.101885

Access Statistics for this article

Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter

More articles in Journal of Corporate Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2022-10-29
Handle: RePEc:eee:corfin:v:69:y:2021:i:c:s0929119921000055