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A Simple Econometric Approach for Modeling Stress Event Intensities

Rainer Jobst, Daniel Rösch, Harald Scheule and Martin Schmelzle

Journal of Futures Markets, 2015, vol. 35, issue 4, 300-320

Abstract: This paper introduces a simple, non‐parametric way of inferring risk‐neutral credit stress event intensities for idiosyncratic, sectoral, and global shocks contained in market credit spreads. We provide an econometric analysis of the implied latent stress event dynamics. A vector autoregressive regression model with exogenous variables finds that these intensities can be related to an observable stock market index, the market volatility, the volatility skew, and treasury yields. © 2014 Wiley Periodicals, Inc. Jrl Fut Mark 35:300–320, 2015

Date: 2015
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