Stable processes: theory and applications in finance

 

Show simple item record

dc.contributor.advisor Mataramvura, Sure en_ZA
dc.contributor.advisor Taylor, David en_ZA
dc.contributor.author Kateregga, Michael en_ZA
dc.date.accessioned 2018-01-29T07:27:22Z
dc.date.available 2018-01-29T07:27:22Z
dc.date.issued 2017 en_ZA
dc.identifier.citation Kateregga, M. 2017. Stable processes: theory and applications in finance. University of Cape Town. en_ZA
dc.identifier.uri http://hdl.handle.net/11427/27069
dc.description.abstract This thesis is a study on stable distributions and some of their applications in understanding financial markets. Three broad problems are explored: First, we study a parameter and density estimation problem for stable distributions using commodity market data. We investigate and compare the accuracy of the quantile, logarithmic, maximum likelihood (ML) and empirical characteristic function (ECF) methods. It turns out that the ECF is the most recommendable method, challenging literature that instead suggests the ML. Secondly, we develop an affine theory for subordinated random processes and apply the results to pricing commodity futures in markets where the spot price includes jumps. The jumps are introduced by subordinating Brownian motion in the spot model by an α-stable process, α ε (0; 1] which leads to a new pricing approach for models with latent variables. The third problem is the pricing of general derivatives and risk management based on Malliavin calculus. We derive a Bismut-Elworthy-Li (BEL) representation formula for computing financial Greeks under the framework of subordinated Brownian motion by an inverse α-stable process with α ε (0; 1]. This subordination by an inverse α-stable process allows zero returns in the model rendering it fit for illiquid emerging markets. In addition, we demonstrate that the model is best suited for pricing derivatives with irregular payoff functions compared to the traditional Euler methods. en_ZA
dc.language.iso eng en_ZA
dc.subject.other Actuarial Science en_ZA
dc.title Stable processes: theory and applications in finance 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 Doctoral en_ZA
dc.type.qualificationname PhD en_ZA
uct.type.filetype Text
uct.type.filetype Image


Files in this item

This item appears in the following Collection(s)

Show simple item record