Do Equity Markets Favor Credit Market News Over Options Market News?
Author InfoAntje Berndt Anastasiya Ostrovnaya Abstract Both credit default swap (CDS) and options markets often experience abnormal swings prior to the announcement of negative credit news. With the exclusion of negative earnings announcements, we find that options prices reveal information about such forthcoming adverse events at least as early as do credit spreads. Prior to negative credit news being publicly disclosed, we find that the equity market does not respond to abnormal movement in options prices unless that information has also manifested itself in the CDS market. A potential explanation is that options are more likely to trade on unsubstantiated rumors than are default swaps. Download InfoTo download: If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS s
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