Jump and Cojump Risk in Subprime Home Equity Derivatives
Posted: 21 May 2019
Date Written: May 14, 2011
I analyze the jump frequency in the ABX index of subprime home equity credit default swaps and CME housing futures. Jumps begin to appear prior to 2007, but are more pronounced in the housing futures than the ABX. I can explain nearly 85% of the jumps from news and the housing futures. A 20 point slope in the housing futures curve leads to an expected jump of -1:4% in the BBB- ABX.
Keywords: Asset Backed Securities, Credit Default Swaps, Housing Futures, Subprime, Jumps, Cojumps
JEL Classification: G13, G32, E44
Suggested Citation: Suggested Citation