The paper, “Credit Spread News and Financial Market Risk,” examines a simple issue. Do the changes in bond spreads tell us something about financial risk that we do not already know? The answer after significant analysis clearly indicates that there is something in credit market pricing that provides insight into the behavior of volatility, as measured by the VIX, realized volatility, and GARCH modeling. If there is a shock to credit spreads, there will be a spillover to higher volatility. Now, this shock effect is centered on recessions, but the evidence is clear. Follow debt markets as another tool to tell you something about financial risk.
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