Equity options can act as an alternative to credit default swaps for detecting a company’s credit risk. Photo via Getty Images

Up until the 2007-2009 financial crisis, credit default swaps (CDS) were a predominant method for predicting the probability of corporate default. CDS function like insurance for loan assets — if an asset defaults, the bank who purchased the CDS would recoup their loss. Higher-risk assets usually have higher premiums, and in this way the price of a CDS indicates the probability of default.

When the housing market crashed in 2007, the CDS market crashed along with it when banks had to pay out more than they had expected. The CDS market is not expected to ever return to its previous high, leaving a void in market-driven estimates for determining an asset’s default probability.

To fill that void, a team of researchers including Rice Business Professor Robert Dittmar created an alternative method for measuring default risk: equity options data. The team found that equity options not only correlate with CDS data in terms of accurate prediction of default but also provide additional insights on what types of assets are more likely to default, and when they will default.

There are two types of options, a call option, which is essentially a bet that a stock’s price will be higher than a contracted value (the strike price) and a put option, which is a bet that a stock’s price will be less than a contracted value.

A put is often viewed as an insurance contract — if you hold a stock, but also a put option on it, you limit your loss on the stock if the stock price falls.

“What we are looking at is essentially how expensive put options get,” says Dittmar. “If the market thinks a company is likely to default, it expects that its stock value will fall (almost to zero). As a result, put options, which represent insurance against this loss become more expensive. We are looking at how these option prices change to see if they inform us about the probabilities of default.”

According to Dittmar and his team, this approach has several advantages. 1) There are more stocks with options than CDS. 2) The CDS market is drying up whereas the option market remains liquid. And 3) Because of the nature of an option contract, and the fact that in principle equity holders have the lowest claim on a company’s assets, this approach may allow investors to predict losses in case of default.

The team looked at CDS quotes on 276 firms between 2002 and 2017, focusing attention on entities that had quote data available on one-year credit default swaps. The 15-year sample enabled the researchers to analyze the money lost through defaults over a longer period of time, including the 2007-2009 financial crisis.

Using equity options data as a predictor of default led to some interesting insights. First, there are two components that investors in corporate bonds think about when weighing default risk — the probability of default and (should there be a default) how much of the bond’s principal they will get back (i.e., recovery rate). “What we see is that credit ratings imply different levels of default thresholds, which may mean that investors believe that there are differences in the amount that debt holders will lose in the case of default,” says Dittmar.

Second, option-implied default probabilities correlate to historical changes in the economy. Default probabilities are higher in bad economic times and for firms with poorer credit ratings and financial positions. Default spikes are more likely during times of economic turbulence, such as the financial crisis of 2007-2009, which correlated with the decline of the CDS market after an onslaught of debt defaults during the recession. Assets are less likely to default during times of economic expansion. Over the period of 2013-2017, forecasted losses through defaults hovered around 15%.

The research sample ends in 2017, and the paper was published in 2020, about a month after the start of the coronavirus pandemic. Since then, there have been unprecedented changes in the economy, and some economists are anticipating another recession in 2023. With such instability in the market, multiple methods of predicting losses should be especially relevant. This research suggests that the equity options market may provide additional ways of finding the probability of these losses.

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This article originally ran on Rice Business Wisdom and was based on research from Robert Dittmar, professor of finance at the Jones Graduate School of Business at Rice University.

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Texas is the 4th hardest working state in America, report finds

Ranking It

It's no secret that Texans are hardworking people. To align with the Labor Day holiday, a new WalletHub study asserts that the Lone Star State is one of the five most hardworking states in America for 2025.

The report ranked Texas the fourth most hardworking state this year, indicating that its residents are working harder than ever after the state fell into seventh place in 2024. Texas previously ranked No. 4 in 2019 and 2020, slipped into No. 5 in 2021 and 2022, then continued falling into sixth place in 2023. But now the state is making its way back to the top of the list.

WalletHub's analysts compared all 50 states based on "direct" and "indirect" work factors. The six "direct" work factors included each state's average workweek hours, employment rates, the share of households where no adults work, the share of workers leaving vacation time unused, and other data. The four "indirect" work factors consisted of workers' average commute times, the share of workers with multiple jobs, the annual volunteer hours per resident, and the average leisure time spent per day.

North Dakota landed on top as the most hardworking state in America for 2025 for another year in a row, earning a score of 66.17 points out of a possible 100. For comparison, Texas ranked No. 4 with 57.06 points. Alaska (No. 2), South Dakota (No. 3), and Hawaii (No. 5) round out the top five hardest working states.

Across the study's two main categories, Texas ranked No. 5 in the "direct" work factors ranking, and earned a respectable No. 18 rank for its "indirect" work factors.

Broken down further, Texans have the second-longest average workweek hours in America, and they have the 12th best average commute times. Texans have the 6th lowest amount of average leisure time spent per day, the report also found.

According to the study's findings, many Americans nationwide won't take the chance to not work as hard when presented with the opportunity. A 2024 Sorbet PTO report found 33 percent of Americans' paid time off was left unused in 2023.

"While leaving vacation time on the table may seem strange to some people, there are plenty of reasons why workers choose to do so," the report's author wrote. "Some fear that if they take time off they will look less dedicated to the job than other employees, risking a layoff. Others worry about falling behind on their work or are concerned that the normal workflow will not be able to function without them."

The top 10 hardest working states are:

  • No. 1 – North Dakota
  • No. 2 – Alaska
  • No. 3 – South Dakota
  • No. 4 – Texas
  • No. 5 – Hawaii
  • No. 6 – Virginia
  • No. 7 – New Hampshire
  • No. 8 – Wyoming
  • No. 9 – Maryland
  • No. 10 – Nebraska
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This story originally appeared on CultureMap.com.

Houston femtech co. debuts new lactation and wellness pods

mom pod

Houston-based femtech company Work&, previously known as Work&Mother, has introduced new products in recent months aimed at supporting working mothers and the overall health of all employees.

The company's new Lactation Pod and Hybrid Pod serve as dual-use lactation and wellness spaces to meet employer demand, the company shared in a news release. The compact pods offer flexible design options that can serve permanent offices and nearly all commercial spaces.

They feature a fully compliant lactation station while also offering wellness functionalities that can support meditation, mental health, telehealth and prayer. In line with Work&'s other spaces, the pods utilize the Work& scheduling platform, which prioritizes lactation bookings to help employers comply with the PUMP Act.

“This isn’t about perks,” Jules Lairson, Work& co-founder and COO, said in the release. “It’s about meeting people where they are—with dignity and intentional design. That includes the mother returning to work, the employee managing anxiety, and everyone in between.”

According to the company, several Fortune 500 companies are already using the pods, and Work& has plans to grow the products' reach.

Earlier this year, Work& introduced its first employee wellness space at MetroNational’s Memorial City Plazas, representing Work&'s shift to offer an array of holistic health and wellness solutions for landlords and tenants.

The company, founded in 2017 by Lairson and CEO Abbey Donnell, was initially focused on outfitting commercial buildings with lactation accommodations for working parents. While Work& still offers these services through its Work&Mother branch, the addition of its Work&Wellbeing arm allowed the company to also address the broader wellness needs of all employees.

The company rebranded as Work& earlier this year.