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Jump and Cojump Risk in Subprime Home Equity Derivatives
2011
Social Science Research Network
I analyze the jump risk in the ABX index of subprime home equity credit default swaps and CME housing futures. Using estimators of the jump and cojump components of security prices, I document: (1) signi...cant jumps in the ABX as early as September 2006, well before any problems in the mortgage market were discussed in the press or policy circles; (2) news explains up to 56% of the jump risk; (3) the return variation due to jumps in the housing futures is above 40%, almost two times larger
doi:10.2139/ssrn.1089274
fatcat:thrc2vx2lzciledmw6hfee2i2e