Hedging credit: Equity liquidity matters

Journal of Financial Intermediation

Volumn 18, Issue 1, 2009, Pages 112-123

  Das, Sanjiv R ^a   Hanouna, Paul ^b  

^a SANTA CLARA UNIVERSITY   (United States)

^b VILLANOVA UNIVERSITY   (United States)

Author keywords

Basis; Credit default swap; Liquidity

Indexed keywords

EID: 56249087945     PISSN: 10429573     EISSN: 10960473     Source Type: Journal    
DOI: 10.1016/j.jfi.2008.08.005     Document Type: Article

References (31)

1. Acharya V., and Pedersen L. Asset pricing with liquidity risk. J. Finan. Econ. 77 2 (2005) 375-410
2. Acharya, V., Schaefer, S., Zhang, Y., 2007. Liquidity risk and correlation risk: A clinical study of the General Motors and Ford downgrade of May 2005. Working paper, London Business School
3. Amihud Y. Illiquidity and stock returns: Cross-section and time series effects. J. Finan. Markets 5 (2002) 31-56
4. Amihud Y., and Mendelson H. Asset pricing and the bid-ask spread. J. Finan. Econ. 17 (1986) 223-249
5. Avramov D., Chordia T., and Goyal A. Liquidity and autocorrelations in individual stock returns. J. Finance 61 5 (2006) 2365-2394
6. Berndt, A., Douglas, R., Duffie, D., Ferguson, M., Schranz, D., 2003. Measuring default-risk premia from default swap rates and EDFs. Working paper, Graduate School of Business, Stanford University
7. Bessembinder H., Maxwell W., and Venkataraman K. Market transparency, liquidity externalities, and institutional trading costs in corporate bonds. J. Finan. Econ. 82 (2006) 251-288
8. Bharath, S., Shumway, T., 2005. Forecasting default with the KMV-Merton model. Working paper, University of Michigan
9. Blume M., Lim F., and MacKinlay C.A. The declining credit quality of U.S. corporate debt: Myth or reality?. J. Finance 53 (1998) 1389-1413
10. Carr, P., Wu, L., 2007. A simple robust link between American puts and credit insurance. Working paper, Baruch College
11. Chacko, G., 2005. Liquidity risk in the corporate bond markets. Working paper, Harvard Business School
12. Chacko G., Jurek J., and Stafford E. The price of immediacy. J. Finance 63 3 (2008) 1253-1290
13. Chen L., Lesmond D., and Wei J. Corporate yield spreads and bond liquidity. J. Finance 62 1 (2007) 119-149
14. Collin-Dufresne P., Goldstein R., and Martin J.S. The determinants of spread changes. J. Finance 56 (2001) 2177-2207
15. Das, S., Hanouna, P., Sarin, A., 2006. Back to basics: Fundamentals-based versus market-based cross-sectional models of CDS spreads. Working paper, Santa Clara University
16. Das, S., Hanouna, P., 2007. Run length and liquidity. Working paper, Santa Clara University
17. de Jong, F., Driessen, J., 2005. Liquidity risk premia in corporate bond markets. Working paper, University of Amsterdam
18. Downing, C., Underwood, S., Xing, Y., 2007. The relative informational efficiency of stocks and bonds: An intraday analysis. Working paper, Rice University
19. Duffie D., Saita L., and Wang K. Multiperiod corporate default probabilities with stochastic covariates. J. Finan. Econ. 83 (2007) 635-665
20. Ericsson J., and Renault O. Liquidity and credit risk. J. Finance 61 5 (2006) 2219-2250
21. Ericsson, J., Jacobs, K., Oviedo, R., in press. The determinants of credit default swap premia. J. Finan. Quant. Anal
22. Fama E.F., and French K.R. Industry costs of equity. J. Finan. Econ. 43 (1997) 153-193
23. Goldstein, M., Hotchkiss, E., Sirri, E., 2006. Transparency and liquidity: A controlled experiment on corporate bonds. Working paper, Boston College
24. Huang, J., Huang, M., 2003. How much of the corporate-treasury yield spread is due to credit risk? Working paper, Penn State
25. Leland H. Option pricing and replication with transaction costs. J. Finance 40 (1985) 1283-1301
26. Lesmond D., Ogden J., and Trzcinka C. A new estimate of transaction costs. Rev. Finan. Stud. 12 5 (1999) 1113-1141
27. Longstaff F., Mithal S., and Neis E. Corporate yield spreads: Default risk or liquidity? New evidence from the credit default swap market. J. Finance 60 (2005) 2213-2253
28. Mahanti, S., Nashikkar, A., Subrahmanyam, M., 2007. Latent liquidity and corporate bond spreads. Working paper, NYU Stern School of Business
29. Merton R.C. On the pricing of corporate debt: The risk structure of interest rates. J. Finance 29 (1974) 449-470
30. Sobehart, J., Stein, R., Mikityanskaya, V., Li, L., 2000. Moody's public firm risk model: A hybrid approach to modeling short term default risk, global credit research. Moody's Investors Service
31. Vassalou M., and Xing Y. Default risk in equity returns. J. Finance 59 (2004) 831-868