Ambiguity, Volatility, and Credit Risk

Seminar / Lecture
Open to the Public

Event poster

You are cordially invited to attend the upcoming FRE Lecture on Thursday, April 11th at 6PM in LC 400 (Dibner Building - 4th Floor). Dr. Yehuda Izhakian will present a talk on the following topic:


Ambiguity, Volatility, and Credit Risk


We explore the implications of ambiguity for the pricing of credit default swaps (CDSs). A model of heterogeneous investors with independent preferences for ambiguity and risk shows that, since CDS contracts are assets in zero net supply, the net credit risk exposure of the marginal investor determines the sign of the impact of ambiguity on CDS spreads. We find that ambiguity has an economically signicant negative impact on CDS spreads, on average, suggesting that the marginal investor is a net buyer of credit protection. A one standard deviation increase in ambiguity is estimated to decrease CDS spreads by approximately 6%.


Dr. Yehuda Izhakian is an Assistant Professor of Economics and Finance at Baruch College, City University of New York, and a Visiting Professor Scholar at the Stern School of Business, New York University. Dr. Izhakian holds a Ph.D. degree in economics and finance from Tel-Aviv University. He published his work in leading economics and finance journals, including The Review of Economic Studies and The Journal of Financial Economics.

Dr. Izhakian’s primary research focuses on ambiguity and its implications for economic and financial decisions. His research combines decision theory, financial economics, asset pricing, and corporate finance. It includes applications for optimal portfolio selection, ambiguity hedging, CSD and option, payout policy, capital structure, and contracting. Dr. Izhakian’s main achievement is introducing a theoretically-based measure of ambiguity, allowing for an empirical identification of the degree of ambiguity. For his research, Dr. Izhakian received several prestigious grants including the Marie Currie fellowship. 

We look forward to having you join us next Thursday for the talk and refreshments. See attached poster for more details. Please mark your calendars.