Level Dependence in Volatility in Linear-Rational Term Structure Models
| dc.contributor.advisor | Backwell, Alex | |
| dc.contributor.author | Ramnarayan, Kalind | |
| dc.date.accessioned | 2020-02-20T12:28:45Z | |
| dc.date.available | 2020-02-20T12:28:45Z | |
| dc.date.issued | 2019 | |
| dc.date.updated | 2020-02-14T09:39:09Z | |
| dc.description.abstract | The degree of level dependence in interest rate volatility is analysed in the linearrational term structure model. The linear-rational square-root (LRSQ) model, where level dependence is set a priori, is compared to a specification where the factor process follows CEV-type dynamics which allows a more flexible degree of level dependence. Parameters are estimated using an unscented Kalman filter in conjunction with quasi-maximum likelihood. An extended specification for the state price density process is required to ensure reliable parameter estimates. The empirical analysis indicates that the LRSQ model generally overestimates level dependence. Although the CEV specification captures the degree of level dependence in volatility more accurately, it has a trade-off with analytical tractability. The optimal specification, therefore, depends on the type of model implementation and general economic conditions. | |
| dc.identifier.apacitation | Ramnarayan, K. (2019). <i>Level Dependence in Volatility in Linear-Rational Term Structure Models</i>. (). ,Faculty of Commerce ,African Institute of Financial Markets and Risk Management. Retrieved from http://hdl.handle.net/11427/31207 | en_ZA |
| dc.identifier.chicagocitation | Ramnarayan, Kalind. <i>"Level Dependence in Volatility in Linear-Rational Term Structure Models."</i> ., ,Faculty of Commerce ,African Institute of Financial Markets and Risk Management, 2019. http://hdl.handle.net/11427/31207 | en_ZA |
| dc.identifier.citation | Ramnarayan, K. 2019. Level Dependence in Volatility in Linear-Rational Term Structure Models. | en_ZA |
| dc.identifier.ris | TY - Thesis / Dissertation AU - Ramnarayan, Kalind AB - The degree of level dependence in interest rate volatility is analysed in the linearrational term structure model. The linear-rational square-root (LRSQ) model, where level dependence is set a priori, is compared to a specification where the factor process follows CEV-type dynamics which allows a more flexible degree of level dependence. Parameters are estimated using an unscented Kalman filter in conjunction with quasi-maximum likelihood. An extended specification for the state price density process is required to ensure reliable parameter estimates. The empirical analysis indicates that the LRSQ model generally overestimates level dependence. Although the CEV specification captures the degree of level dependence in volatility more accurately, it has a trade-off with analytical tractability. The optimal specification, therefore, depends on the type of model implementation and general economic conditions. DA - 2019 DB - OpenUCT DP - University of Cape Town KW - Mathematical Finance LK - https://open.uct.ac.za PY - 2019 T1 - Level Dependence in Volatility in Linear-Rational Term Structure Models TI - Level Dependence in Volatility in Linear-Rational Term Structure Models UR - http://hdl.handle.net/11427/31207 ER - | en_ZA |
| dc.identifier.uri | http://hdl.handle.net/11427/31207 | |
| dc.identifier.vancouvercitation | Ramnarayan K. Level Dependence in Volatility in Linear-Rational Term Structure Models. []. ,Faculty of Commerce ,African Institute of Financial Markets and Risk Management, 2019 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/31207 | en_ZA |
| dc.language.rfc3066 | eng | |
| dc.publisher.department | African Institute of Financial Markets and Risk Management | |
| dc.publisher.faculty | Faculty of Commerce | |
| dc.subject | Mathematical Finance | |
| dc.title | Level Dependence in Volatility in Linear-Rational Term Structure Models | |
| dc.type | Master Thesis | |
| dc.type.qualificationlevel | Masters | |
| dc.type.qualificationname | MPhil |