The cost of using misspecified models to exercise and hedge American options on coupon bearing bonds

 

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dc.contributor.advisor Silverman, Searle en_ZA
dc.contributor.advisor McWalter, Thomas en_ZA
dc.contributor.author Welihockyj, Alexander en_ZA
dc.date.accessioned 2016-07-20T12:29:40Z
dc.date.available 2016-07-20T12:29:40Z
dc.date.issued 2016 en_ZA
dc.identifier.citation Welihockyj, A. 2016. The cost of using misspecified models to exercise and hedge American options on coupon bearing bonds. University of Cape Town. en_ZA
dc.identifier.uri http://hdl.handle.net/11427/20532
dc.description.abstract This dissertation investigates the cost of using single-factor models to exercise and hedge American options on South African coupon bearing bonds, when the simulated market term structure is driven by a two-factor model. Even if the single factor models are re-calibrated on a daily basis to the term structure, we find that the exercise and hedge strategies can be suboptimal and incur large losses. There is a vast body of research suggesting that real market term structures are in actual fact driven by multiple factors, so suboptimal losses can be largely reduced by simply employing a well-specified multi-factor model. en_ZA
dc.language.iso eng en_ZA
dc.subject.other Mathematical Finance en_ZA
dc.title The cost of using misspecified models to exercise and hedge American options on coupon bearing bonds en_ZA
dc.type Master Thesis
uct.type.publication Research en_ZA
uct.type.resource Thesis en_ZA
dc.publisher.institution University of Cape Town
dc.publisher.faculty Faculty of Commerce en_ZA
dc.publisher.department Division of Actuarial Science en_ZA
dc.type.qualificationlevel Masters
dc.type.qualificationname MPhil en_ZA
uct.type.filetype Text
uct.type.filetype Image
dc.identifier.apacitation Welihockyj, A. (2016). <i>The cost of using misspecified models to exercise and hedge American options on coupon bearing bonds</i>. (Thesis). University of Cape Town ,Faculty of Commerce ,Division of Actuarial Science. Retrieved from http://hdl.handle.net/11427/20532 en_ZA
dc.identifier.chicagocitation Welihockyj, Alexander. <i>"The cost of using misspecified models to exercise and hedge American options on coupon bearing bonds."</i> Thesis., University of Cape Town ,Faculty of Commerce ,Division of Actuarial Science, 2016. http://hdl.handle.net/11427/20532 en_ZA
dc.identifier.vancouvercitation Welihockyj A. The cost of using misspecified models to exercise and hedge American options on coupon bearing bonds. [Thesis]. University of Cape Town ,Faculty of Commerce ,Division of Actuarial Science, 2016 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/20532 en_ZA
dc.identifier.ris TY - Thesis / Dissertation AU - Welihockyj, Alexander AB - This dissertation investigates the cost of using single-factor models to exercise and hedge American options on South African coupon bearing bonds, when the simulated market term structure is driven by a two-factor model. Even if the single factor models are re-calibrated on a daily basis to the term structure, we find that the exercise and hedge strategies can be suboptimal and incur large losses. There is a vast body of research suggesting that real market term structures are in actual fact driven by multiple factors, so suboptimal losses can be largely reduced by simply employing a well-specified multi-factor model. DA - 2016 DB - OpenUCT DP - University of Cape Town LK - https://open.uct.ac.za PB - University of Cape Town PY - 2016 T1 - The cost of using misspecified models to exercise and hedge American options on coupon bearing bonds TI - The cost of using misspecified models to exercise and hedge American options on coupon bearing bonds UR - http://hdl.handle.net/11427/20532 ER - en_ZA


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