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

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dc.contributor.advisorSilverman, Searleen_ZA
dc.contributor.advisorMcWalter, Thomasen_ZA
dc.contributor.authorWelihockyj, Alexanderen_ZA
dc.date.accessioned2016-07-20T12:29:40Z
dc.date.available2016-07-20T12:29:40Z
dc.date.issued2016en_ZA
dc.description.abstractThis 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.identifier.apacitationWelihockyj, 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/11427/20532en_ZA
dc.identifier.chicagocitationWelihockyj, 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/11427/20532en_ZA
dc.identifier.citationWelihockyj, 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.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
dc.identifier.urihttp://hdl.handle.net/11427/20532
dc.identifier.vancouvercitationWelihockyj 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/11427/20532en_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.titleThe cost of using misspecified models to exercise and hedge American options on coupon bearing bondsen_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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