Hedging volatility: different perspectives compared
| dc.contributor.advisor | Ouwehand, Peter | |
| dc.contributor.author | Ogg, Richard | |
| dc.date.accessioned | 2021-02-18T13:37:09Z | |
| dc.date.available | 2021-02-18T13:37:09Z | |
| dc.date.issued | 2020 | |
| dc.date.updated | 2021-02-18T13:36:31Z | |
| dc.description.abstract | The accuracy of the Black and Scholes (1973) delta and vega neutral portfolio for a vanilla option was compared to a benchmark set by the Heston (1993) model in a stochastic volatility environment. The Black-Scholes portfolio was implemented using a fixed volatility and by implying volatility from the market. Additionally, a portfolio based on the Dupire (1994) local volatility model was also compared. It was found that a portfolio consisting of two short maturity options with matching maturities was best hedged by the Black-Scholes model when using implied volatility. This result was not maintained when the two options had mismatching maturities as the proportional differences in the vegas no longer cancelled. Further examination was completed on the type of financial instruments used to hedge volatility, comparing portfolios that consisted of an additional option and a variance swap to offset any vega. It was found that both hedged the option well, with similar accuracies. | |
| dc.identifier.apacitation | Ogg, R. (2020). <i>Hedging volatility: different perspectives compared</i>. (). ,Faculty of Commerce ,Financial Accounting. Retrieved from http://hdl.handle.net/11427/32900 | en_ZA |
| dc.identifier.chicagocitation | Ogg, Richard. <i>"Hedging volatility: different perspectives compared."</i> ., ,Faculty of Commerce ,Financial Accounting, 2020. http://hdl.handle.net/11427/32900 | en_ZA |
| dc.identifier.citation | Ogg, R. 2020. Hedging volatility: different perspectives compared. . ,Faculty of Commerce ,Financial Accounting. http://hdl.handle.net/11427/32900 | en_ZA |
| dc.identifier.ris | TY - Master Thesis AU - Ogg, Richard AB - The accuracy of the Black and Scholes (1973) delta and vega neutral portfolio for a vanilla option was compared to a benchmark set by the Heston (1993) model in a stochastic volatility environment. The Black-Scholes portfolio was implemented using a fixed volatility and by implying volatility from the market. Additionally, a portfolio based on the Dupire (1994) local volatility model was also compared. It was found that a portfolio consisting of two short maturity options with matching maturities was best hedged by the Black-Scholes model when using implied volatility. This result was not maintained when the two options had mismatching maturities as the proportional differences in the vegas no longer cancelled. Further examination was completed on the type of financial instruments used to hedge volatility, comparing portfolios that consisted of an additional option and a variance swap to offset any vega. It was found that both hedged the option well, with similar accuracies. DA - 2020 DB - OpenUCT DP - University of Cape Town KW - finance LK - https://open.uct.ac.za PY - 2020 T1 - Hedging volatility: different perspectives compared TI - Hedging volatility: different perspectives compared UR - http://hdl.handle.net/11427/32900 ER - | en_ZA |
| dc.identifier.uri | http://hdl.handle.net/11427/32900 | |
| dc.identifier.vancouvercitation | Ogg R. Hedging volatility: different perspectives compared. []. ,Faculty of Commerce ,Financial Accounting, 2020 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/32900 | en_ZA |
| dc.language.rfc3066 | eng | |
| dc.publisher.department | Financial Accounting | |
| dc.publisher.faculty | Faculty of Commerce | |
| dc.subject | finance | |
| dc.title | Hedging volatility: different perspectives compared | |
| dc.type | Master Thesis | |
| dc.type.qualificationlevel | Masters | |
| dc.type.qualificationlevel | MPhil |