Mixed Monte Carlo in the foreign exchange market

dc.contributor.advisorMcWalter, Thomasen_ZA
dc.contributor.advisorSearle Silverman, Searleen_ZA
dc.contributor.advisorMaze, Sheldonen_ZA
dc.contributor.authorBaker, Christopheren_ZA
dc.date.accessioned2017-09-14T12:22:30Z
dc.date.available2017-09-14T12:22:30Z
dc.date.issued2017en_ZA
dc.description.abstractThe stochastic differential equation (SDE) describing the spot FX rate is of central importance to modelling FX derivatives. A Monte Carlo estimate of the discounted individual payoffs of FX derivatives is taken to arrive at the price, provided there does not exist a closed form solution for the price. One propagates the FX spot rate through time under risk-neutral dynamics to realise the before-mentioned payoffs. A drawback to Monte Carlo becomes evident when the model dynamics become more complicated, such as when more dimensions are added to the dynamics of the model. These additional dimensions can be stochastic volatility and/or stochastic domestic and foreign short rates. This dissertation describes the calibration of such a model using mixed Monte Carlo, as described in Cozma and Reisinger (2015), to both model-generated and market data. Profit and loss analysis of hedging FX derivatives using the mixed Monte Carlo method is conducted when hedging against both model-generated and market data .en_ZA
dc.identifier.apacitationBaker, C. (2017). <i>Mixed Monte Carlo in the foreign exchange market</i>. (Thesis). University of Cape Town ,Faculty of Commerce ,Division of Actuarial Science. Retrieved from http://hdl.handle.net/11427/25193en_ZA
dc.identifier.chicagocitationBaker, Christopher. <i>"Mixed Monte Carlo in the foreign exchange market."</i> Thesis., University of Cape Town ,Faculty of Commerce ,Division of Actuarial Science, 2017. http://hdl.handle.net/11427/25193en_ZA
dc.identifier.citationBaker, C. 2017. Mixed Monte Carlo in the foreign exchange market. University of Cape Town.en_ZA
dc.identifier.ris TY - Thesis / Dissertation AU - Baker, Christopher AB - The stochastic differential equation (SDE) describing the spot FX rate is of central importance to modelling FX derivatives. A Monte Carlo estimate of the discounted individual payoffs of FX derivatives is taken to arrive at the price, provided there does not exist a closed form solution for the price. One propagates the FX spot rate through time under risk-neutral dynamics to realise the before-mentioned payoffs. A drawback to Monte Carlo becomes evident when the model dynamics become more complicated, such as when more dimensions are added to the dynamics of the model. These additional dimensions can be stochastic volatility and/or stochastic domestic and foreign short rates. This dissertation describes the calibration of such a model using mixed Monte Carlo, as described in Cozma and Reisinger (2015), to both model-generated and market data. Profit and loss analysis of hedging FX derivatives using the mixed Monte Carlo method is conducted when hedging against both model-generated and market data . DA - 2017 DB - OpenUCT DP - University of Cape Town LK - https://open.uct.ac.za PB - University of Cape Town PY - 2017 T1 - Mixed Monte Carlo in the foreign exchange market TI - Mixed Monte Carlo in the foreign exchange market UR - http://hdl.handle.net/11427/25193 ER - en_ZA
dc.identifier.urihttp://hdl.handle.net/11427/25193
dc.identifier.vancouvercitationBaker C. Mixed Monte Carlo in the foreign exchange market. [Thesis]. University of Cape Town ,Faculty of Commerce ,Division of Actuarial Science, 2017 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/25193en_ZA
dc.language.isoengen_ZA
dc.publisher.departmentDivision of Actuarial Scienceen_ZA
dc.publisher.facultyFaculty of Commerceen_ZA
dc.publisher.institutionUniversity of Cape Town
dc.subject.otherMathematical Financeen_ZA
dc.titleMixed Monte Carlo in the foreign exchange marketen_ZA
dc.typeMaster Thesis
dc.type.qualificationlevelMasters
dc.type.qualificationnameMPhilen_ZA
uct.type.filetypeText
uct.type.filetypeImage
uct.type.publicationResearchen_ZA
uct.type.resourceThesisen_ZA
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