Explaining the Level of Credit Spreads: Option-Implied Jump Risk Premia in a Firm Value Model
研究期权隐含的跳跃风险溢价能否解释信用利差的高水平，通过结构跳跃扩散模型校准历史数据，发现加入跳跃风险溢价使预测的信用利差更接近实际水平，并改善了波动率的拟合。
We study whether option-implied jump risk premia can explain the high observed level of credit spreads. We use a structural jump-diffusion firm value model to assess the level of credit spreads generated by option-implied jump risk premia. Prices and returns of equity index and individual options are used to estimate the jump parameters. We further calibrate the model to historical information on default risk and the equity premium. The results show that incorporating option-implied jump risk premia brings predicted credit spread levels much closer to observed levels. The introduction of jumps also helps to improve the fit of the volatility of credit spreads and equity returns.