Jump and Cojump Risk in Subprime Home Equity Derivatives

Posted: 21 May 2019

See all articles by Bruce Mizrach

Bruce Mizrach

Rutgers University, Department of Economics

Date Written: May 14, 2011

Abstract

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

Mizrach, Bruce, Jump and Cojump Risk in Subprime Home Equity Derivatives (May 14, 2011). https://doi.org/10.3905/jpm.2012.38.2.136, Available at SSRN: https://ssrn.com/abstract=1089274 or http://dx.doi.org/10.2139/ssrn.1089274

Bruce Mizrach (Contact Author)

Rutgers University, Department of Economics ( email )

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