Default Risk and Option Returns

被引：0
|
作者：
Vasquez A. [1 ]
Xiao X. [2 ]
机构：
[1] Instituto Tecnologico Autonomo de Mexico, Mexico City
[2] Bayes Business School, City University of London, London
来源：
Management Science | 2024年 / 70卷 / 04期
关键词：
capital structure model; default risk; delta-hedged option returns; variance risk premium; volatility;
D O I：
10.1287/MNSC.2023.4796
中图分类号：
学科分类号：
摘要：
This paper studies the effects of default risk on expected equity option returns. In the cross-section, expected delta-hedged equity option returns have a negative relation with default risk measured by credit ratings or default probability. In the time series, credit rating downgrades (upgrades) lead to a decrease (increase) in the firm’s delta-hedged option return. Our results are consistent with a stylized capital structure model in which the negative relation between option returns and default risk is driven by firm leverage and asset volatility. © 2023 INFORMS.
引用
收藏
页码：2144 / 2167
页数：23
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