Credit variance risk premiums

This paper studies variance risk premiums in the credit market using a novel data set of swaptions quotes on CDX North America Investment Grade and High Yield indices. The returns swaps are negative economically large, irrespective rating class. They robust to transaction costs cannot be explained by established risk-factors structural model variables. We also dissect overall premium into receiver payer premiums. show that mainly driven corridor, which is associated with worsening macro-economic conditions. article protected copyright. All rights reserved.