Multi-curve bootstrapping and implied discounting curves in illiquid markets

 

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dc.contributor.advisor Taylor, David en_ZA
dc.contributor.author Sender, Nina Alexandra en_ZA
dc.date.accessioned 2017-09-28T05:29:44Z
dc.date.available 2017-09-28T05:29:44Z
dc.date.issued 2017 en_ZA
dc.identifier.citation Sender, N. 2017. Multi-curve bootstrapping and implied discounting curves in illiquid markets. University of Cape Town. en_ZA
dc.identifier.uri http://hdl.handle.net/11427/25447
dc.description.abstract The credit and liquidity crisis of 2007 has triggered a number of inconsistencies in the interest rate market, questioning some of the standard methods and assumptions used to price and hedge interest rate derivatives. It has been shown that using a single risk-free curve (constructed from market instruments referencing underlying rates of varying tenors) to forecast and discount cash flows is not theoretically correct. Standard market practice has evolved to a multi-curve approach, using different curves to forecast and discount cash flows. The risk-free discount curve is proxied by the Overnight-Indexed Swap (OIS) curve. In South Africa there is no liquid market for OIS. In this dissertation a method is developed to estimate the ZAR OIS curve. A cointegration relationship between the SAFEX Overnight Rate, and the 3-month JIBAR rate is shown to exist. This relationship is used in a dual bootstrap algorithm, to simultaneously estimate the ZAR OIS curve and 3-month JIBAR tenor curve, while maintaining arbitrage relationships. The tractability of this method is shown, by pricing options written on ZAR OIS. en_ZA
dc.language.iso eng en_ZA
dc.subject.other Mathematical Finance en_ZA
dc.title Multi-curve bootstrapping and implied discounting curves in illiquid markets en_ZA
dc.type Thesis / Dissertation en_ZA
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 en_ZA
dc.type.qualificationname MPhil en_ZA
uct.type.filetype Text
uct.type.filetype Image


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