EconPapers    
Economics at your fingertips  
 

Credit Spread Option Valuation under GARCH

N. Tahani

Ecole des Hautes Etudes Commerciales de Montreal- from Ecole des Hautes Etudes Commerciales de Montreal-Chaire de gestion des risques.

Abstract: This paper develops closed-form solutions for options on credit spreads with GARCH models. We extend the mean-reverting model proposed in Longstaff and Schwartz (1995) and we use the Heston and Nandi's (1999) GARCH specification rather than the traditional lognormal. Our model, being more flexible, captures better the empirical properties of observed credit spreads and contains Longstaff and Schwartz (1995) model as a special case. GARCH coefficients are estimated using spread levels for corporate bonds.

Keywords: CREDIT; MODELS; RISK (search for similar items in EconPapers)
JEL-codes: E51 E59 (search for similar items in EconPapers)
Date: 2000
References: Add references at CitEc
Citations Track citations by RSS feed

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:fth:etcori:00-07

Access Statistics for this paper

More papers in Ecole des Hautes Etudes Commerciales de Montreal- from Ecole des Hautes Etudes Commerciales de Montreal-Chaire de gestion des risques. Canada; ECOLE DES HAUTES ETUDES COMMERCIALES(H.E.C.),3000, chemin de la Cote-Sainte-Catherine. Montreal (Quebec) Canada H3T 2A7.. Contact information at EDIRC.
Series data maintained by Thomas Krichel ().

 
Page updated 2017-09-29
Handle: RePEc:fth:etcori:00-07