The Prediction Ability Of Implied Volatility In Stock Market To Credit Spreads Of Corporate Bonds

Credit premium is an effective proxy variable to measure corporate bond credit risk,and it is also a key factor for investors to manage portfolio credit risk.Scholars at home and abroad have done a lot of research on the factors influencing the credit premium of corporate bonds.With the continuous development of the financial market,the types of financial products are increasingly rich and diversified,and the stock market and bond market are more and more closely related to each other.Relevant studies abroad show that the stock market has a significant volatility spillover effect on the bond market,that is,the volatility of the stock market will affect the bond yield,whether using implied volatility or realized volatility,this effect remains stable.In contrast,Chinese scholars mainly study the factors affecting corporate bond credit premium from the macroeconomic level and the characteristics of corporate bond issuers,and pay less attention to the role of stock market volatility in the decision of credit premium.In the selection of stock market volatility,we mainly study the credit premium based on historical volatility,but the effect of implied volatility on the pricing mechanism of corporate bond credit premium has not attracted enough attention.Credit spreads curve is an important tool to predict the future economic situation.To study the effect of volatility implied in the SSE 50ETF option on the credit spreads of corporate bonds,we can test whether the implied volatility contain the information of the economic situation,and also evaluate the pricing efficiency of the SSE 50ETF option.What's more,it can provide a new way for investors to hedge credit risk.Therefore,it is of great significance to study the implied volatility of the stock market for the credit spread of corporate bonds.Taking the general corporate bonds issued and traded on the stock exchanges from February 2015 to March 2018 as the research sample,this paper deletes the floating rate corporate bonds,the rights-bearing corporate bonds(redemption,repurchase,conversion rights,etc.),the corporate bonds with guarantees,mortgages,pledges,and the corporate bonds with no credit rating and AA-rating.The trading data of B-share and H-share corporate bonds are excluded,and a total of 2 740 samples of 103 corporate bonds are obtained.Credit interest of corporate bonds is obtained by matching and differentiating the yields to maturities of Chinese bonds with the remaining maturities of corporate bonds.Through Hausman test,this paper chooses the panel fixed effect regression model to study the influence of implied volatility of SSE 50ETF option on corporate bond credit spreads.Macroeconomic variables such as risk-free interest rate,slope of yield curve and corporate-level indicators such as financial leverage and return on total assets that may affect corporate bond credit spreads are taken as control variables.The advantage of the panel fixed effect regression model is that even if individual characteristics are related to explanatory variables,unbiased and consistent estimates can be obtained.The missing variables which do not change with time,but vary with individuals will not affect the reliability of the estimates.Therefore,the omission of individual characteristic variables such as total issuance,issuance period,industry,coupon rate and so on will not affect the conclusion of this paper.The results of this study show that implied volatility has a significant and positive impact on the credit spreads of different Rating firm bonds.This shows that:(1)The implied volatility of the 50 ETF option in Shanghai Stock Exchange contains the information of the economic situation,and the pricing efficiency of the 50 ETF option in Shanghai Stock Exchange is high.(2)Implied volatility can be used to predict corporate bond credit spreads,which can help investors judge the future economic performance and manage portfolio investment.(3)This paper provides a new idea for investors to hedge credit risk,expands the scope of investors'tools to hedge credit spread risk,and provides a new method to hedge credit spread risk.That is,investors holding corporate bonds can hedge the credit risk by selling the option of SSE 50ETF,and the issuer of corporate bonds can hedge the credit risk by buying the option of SSE 50ETF.The above three points are also the value of this research.The research of this paper needs to be further expanded,mainly in the following two directions:Firstly,the 50ETF option of Shanghai Stock Exchange came out in February 2015,and its development time is relatively short.Compared with the foreign option market,the trading volume of China's option market is still small.In addition,foreign scholars have shown that stock market volatility has different spillover effects on bond market when market volatility is different.When the market volatility is large,the stock market volatility has a negative impact on the bond market,which conforms to "Flight-to-quality".When the stock market volatility is small,the stock market has a positive impact on the bond market.As time goes on and the further development of China's option market,this paper can consider the further expansion of sub-samples according to the fluctuation of the market;second,the sample size of corporate bonds is still relatively limited,although after more than 30 years of development,China's bond market has made some progress,but compared with the volume and perfection of foreign bond markets,China's bond market is still underdeveloped,and there is still room for development.