TY  - JOUR
AU  - Collin-Dufresne,Pierre
AU  - Goldstein,Robert S.
AU  - Yang,Fan
TI  - On the Relative Pricing of long Maturity S&P 500 Index Options and CDX Tranches
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15734
PY  - 2010
Y2  - February 2010
UR  - http://www.nber.org/papers/w15734
L1  - http://www.nber.org/papers/w15734.pdf
N1  - Author contact info:
Pierre Collin-Dufresne
Graduate School of Business
Columbia University
Uris Hall 404
3022 Braodway
New York, NY 10027
Tel: 212/854-6471
E-Mail: pc2415@columbia.edu

Robert Goldstein
University of Minnesota
Finance Department
3-125 Carlson School of Management
321 19th Avenue South
Minneapolis, MN  55455
Tel: 612/624-8581
E-Mail: golds144@umn.edu

Fan Yang
321 19th ave south
E-Mail: yang0946@umn.edu
AB  - We investigate a structural model of market and firm-level dynamics in order to jointly price long-dated S&P 500 options and tranche spreads on the five-year CDX index.  We demonstrate the importance of calibrating the model to match the entire term structure of CDX index spreads because it contains pertinent information regarding the timing of expected defaults and the specification of idiosyncratic dynamics. Our model matches the time series of tranche spreads well, both before and during the financial crisis, thus offering a resolution to the puzzle reported by Coval, Jurek and Stafford (2009).
ER  -