Modelling Equities with a Stochastic Volatility Jump Diffusion
| dc.contributor.advisor | Mahomed, Obeid | |
| dc.contributor.advisor | Taylor, David | |
| dc.contributor.author | Gorven, Matthew | |
| dc.date.accessioned | 2019-02-08T14:19:31Z | |
| dc.date.available | 2019-02-08T14:19:31Z | |
| dc.date.issued | 2018 | |
| dc.date.updated | 2019-02-07T07:19:34Z | |
| dc.description.abstract | The Bates model provides a parsimonious fit to implied volatility surfaces, and its usefulness in developed markets is well documented. However, there is a lack of research assessing its applicability to developing markets. Additionally, research surrounding its usefulness for hedging long term liabilities is limited, despite its frequent use for this purpose. This dissertation dissects the dynamics of the Bates model into the Heston and Merton models in order to separately examine the effects of stochastic volatility and jumps. Challenges surrounding application of this model are investigated through an evaluation of risk-neutral calibration and simulation methods. The model’s ability to fit the implied volatility surfaces from the JSE Top 40 equity index is analysed. Lastly, an evaluation of the model’s delta and vega hedging performance is presented by comparing it to the hedge performance of other commonly used models. | |
| dc.identifier.apacitation | Gorven, M. (2018). <i>Modelling Equities with a Stochastic Volatility Jump Diffusion</i>. (). University of Cape Town ,Faculty of Commerce ,African Institute of Financial Markets and Risk Management. Retrieved from http://hdl.handle.net/11427/29448 | en_ZA |
| dc.identifier.chicagocitation | Gorven, Matthew. <i>"Modelling Equities with a Stochastic Volatility Jump Diffusion."</i> ., University of Cape Town ,Faculty of Commerce ,African Institute of Financial Markets and Risk Management, 2018. http://hdl.handle.net/11427/29448 | en_ZA |
| dc.identifier.citation | Gorven, M. 2018. Modelling Equities with a Stochastic Volatility Jump Diffusion. University of Cape Town. | en_ZA |
| dc.identifier.ris | TY - Thesis / Dissertation AU - Gorven, Matthew AB - The Bates model provides a parsimonious fit to implied volatility surfaces, and its usefulness in developed markets is well documented. However, there is a lack of research assessing its applicability to developing markets. Additionally, research surrounding its usefulness for hedging long term liabilities is limited, despite its frequent use for this purpose. This dissertation dissects the dynamics of the Bates model into the Heston and Merton models in order to separately examine the effects of stochastic volatility and jumps. Challenges surrounding application of this model are investigated through an evaluation of risk-neutral calibration and simulation methods. The model’s ability to fit the implied volatility surfaces from the JSE Top 40 equity index is analysed. Lastly, an evaluation of the model’s delta and vega hedging performance is presented by comparing it to the hedge performance of other commonly used models. DA - 2018 DB - OpenUCT DP - University of Cape Town LK - https://open.uct.ac.za PB - University of Cape Town PY - 2018 T1 - Modelling Equities with a Stochastic Volatility Jump Diffusion TI - Modelling Equities with a Stochastic Volatility Jump Diffusion UR - http://hdl.handle.net/11427/29448 ER - | en_ZA |
| dc.identifier.uri | http://hdl.handle.net/11427/29448 | |
| dc.identifier.vancouvercitation | Gorven M. Modelling Equities with a Stochastic Volatility Jump Diffusion. []. University of Cape Town ,Faculty of Commerce ,African Institute of Financial Markets and Risk Management, 2018 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/29448 | en_ZA |
| dc.language.iso | eng | |
| dc.publisher.department | African Institute of Financial Markets and Risk Management | |
| dc.publisher.faculty | Faculty of Commerce | |
| dc.publisher.institution | University of Cape Town | |
| dc.subject.other | Mathematical Finance | |
| dc.title | Modelling Equities with a Stochastic Volatility Jump Diffusion | |
| dc.type | Master Thesis | |
| dc.type.qualificationlevel | Masters | |
| dc.type.qualificationname | MPhil |