This presentation adresses the structural and statistical relationships between the credit and equity markets. Both markets are naturally linked with each other, but understanding their relative valuation is far from easy. On the one hand, credit- equity relative value can be assessed through statistical analysis, with good results at the aggregated level. Adding dimensions greatly improves the efficiency of this approach, but one has to consider non linear features, crises and changes of regimes in particular. On the other hand, structural models provide an interesting insight at the company level. Stochastic calculus is particularly useful when it comes to jointly analysing credit and equity derivatives. Pricing shares and credit risk in a unified framework is a daunting task, with probably better results on high yield rather than investment grade companies.

Short Bio

Julien is head of Quantitative Research within the Cross-Asset Research group at Société Générale Corporate & Investment Banking. The quantitative research team is active in global macro and relative value strategies, derivatives and structured products, and provides research to investors worldwide. Over the past 13 years, Julien's research has covered topics ranging from exotic credit derivatives pricing to statistical relative value and cross-asset strategies. Julien is a graduate of the Ecole Polytechnique and ENSAE and teaches credit derivatives at Paris VI University.