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| Tekijä: | Batten, J. Ellis, C. Hogan, W. |
| Otsikko: | Scaling the volatility of credit spreads: Evidence from Australian dollar eurobonds |
| Lehti: | International Review of Financial Analysis
2002 : VOL. 11:3, p. 331-344 |
| Asiasana: | Stock markets Credit management Bonds Risk Volatility Time series Models |
| Vapaa asiasana: | Derivatives Spreads |
| Kieli: | eng |
| Tiivistelmä: | The linear rescaling of the variance of an asset's return is used by many asset pricing models when an annualised risk coefficient is required. However, this approach may not be appropriate for time series, which are not independent and identically distributed (IID). This paper investigates the scaling relationships for daily credit spreads, from Jan. 1995 to May 1998, btw. AAA-, AA-, and A-rated Australian dollar denominated Eurobonds with maturities of 2, 5, 7, and 10 years. The credit spread return all display similar scaling properties with the estimated standard deviation, based on scaling at the square root of time, significantly underestimating the actual level of risk predicted from a normal distribution. These results have implications for risk managers and trading of credit spread instruments. |
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