On the relative pricing of long maturity S&P 500 index options and CDX tranches
By: Pierre Collin-Dufresne, Robert S. Goldstein, Fan Yang.
Contributors: Goldstein, Robert S.; Yang, Fan.; National Bureau of Economic Research.
Series: NBER working paper series -- working paper 15734; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 15734.
Publisher: National Bureau of Economic Research
Published: 2010
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "We investigate a structural model of market and firm-level dynamics in order to jointly price long-dated S&P 500 options and tranche spreads on the five-year CDX index.  We demonstrate the importance of calibrating the model to match the entire term structure of CDX index spreads because it contains pertinent information regarding the timing of expected defaults and the specification of idiosyncratic dynamics.  Our model matches the time series of tranche spreads well, both before and during the financial crisis, thus offering a resolution to the puzzle reported by Coval, Jurek and Stafford (2009)"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 3/16/2010.

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