Does the Introduction of One Derivative Affect Another Derivative? TheEffect of Credit Default Swaps Trading on Equity Options

讲座名称: Does the Introduction of One Derivative Affect Another Derivative? TheEffect of Credit Default Swaps Trading on Equity Options
讲座时间: 2017-02-24
讲座人: 金涌
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校区: 兴庆校区
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讲座内容: 讲座二: 讲座题目:Does the Introduction of One Derivative Affect Another Derivative? TheEffect of Credit Default Swaps Trading on Equity Options 讲座时间:2017年2月24日下午3:30-4:30 讲座地点:主A-104 主持人:曾卫红 讲座人:金涌 论文摘要:There are numerous derivatives, often on the sameunderlying firms, in the financial markets. However, little is known about the interactions between different typesof derivatives. In this paper, we show that the inception of creditderivatives, represented by credit default swaps (CDS), makes the equityoptions on the same underlying firm more expensive. The expensiveness of optiondue to CDS trading is not completely driven by the increased riskiness of thefirm because the delta-hedged equity option returns, which account forunderlying stock price movement, are lower. The effect of CDS trading is morepronounced for call options than put options. The evidence is consistent withthe view that CDS trading crowds out option trading, option dealers chargehigher option premiums due to limited intermediation capacity.    
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