Browsing by Author "Vakaloudis, Dmitri"

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    Application of Volatility Targeting Strategies within a Black-Scholes Framework
    (2019) Vakaloudis, Dmitri; Mahomed, Obeid
    The traditional Black-Scholes (BS) model relies heavily on the assumption that underlying returns are normally distributed. In reality however there is a large amount of evidence to suggest that this assumption is weak and that actual return distributions are non-Gaussian. This dissertation looks at algorithmically generating a Volatility Targeting Strategy (VTS) which can be used as an underlying asset. The rationale here is that since the VTS has a constant prespecified level of volatility, its returns should be normally distributed, thus tending closer to an underlying that adheres to the assumptions of BS.