Bias-Free Joint Simulation of Multi-Factor Short Rate Models and Discount Factor
| dc.contributor.advisor | McWalter,Tom | |
| dc.contributor.advisor | Kienitz, Jorg | |
| dc.contributor.author | Lopes, Marcio Ferrao | |
| dc.date.accessioned | 2019-02-06T13:23:21Z | |
| dc.date.available | 2019-02-06T13:23:21Z | |
| dc.date.issued | 2018 | |
| dc.date.updated | 2019-02-06T07:08:59Z | |
| dc.description.abstract | This dissertation explores the use of single- and multi-factor Gaussian short rate models for the valuation of interest rate sensitive European options. Specifically, the focus is on deriving the joint distribution of the short rate and the discount factor, so that an exact and unbiased simulation scheme can be derived for risk-neutral valuation. We see that the derivation of the joint distribution remains tractable when working with the class of Gaussian short rate models. The dissertation compares three joint and exact simulation schemes for the short rate and the discount factor in the single-factor case; and two schemes in the multifactor case. We price European floor options and European swaptions using a twofactor Gaussian short rate model and explore the use of variance reduction techniques. We compare the exact and unbiased schemes to other solutions available in the literature: simulating the short rate under the forward measure and approximating the discount factor using quadrature. | |
| dc.identifier.apacitation | Lopes, M. F. (2018). <i>Bias-Free Joint Simulation of Multi-Factor Short Rate Models and Discount Factor</i>. (). University of Cape Town ,Faculty of Commerce ,African Institute of Financial Markets and Risk Management. Retrieved from http://hdl.handle.net/11427/29396 | en_ZA |
| dc.identifier.chicagocitation | Lopes, Marcio Ferrao. <i>"Bias-Free Joint Simulation of Multi-Factor Short Rate Models and Discount Factor."</i> ., University of Cape Town ,Faculty of Commerce ,African Institute of Financial Markets and Risk Management, 2018. http://hdl.handle.net/11427/29396 | en_ZA |
| dc.identifier.citation | Lopes, M. 2018. Bias-Free Joint Simulation of Multi-Factor Short Rate Models and Discount Factor. University of Cape Town. | en_ZA |
| dc.identifier.ris | TY - Thesis / Dissertation AU - Lopes, Marcio Ferrao AB - This dissertation explores the use of single- and multi-factor Gaussian short rate models for the valuation of interest rate sensitive European options. Specifically, the focus is on deriving the joint distribution of the short rate and the discount factor, so that an exact and unbiased simulation scheme can be derived for risk-neutral valuation. We see that the derivation of the joint distribution remains tractable when working with the class of Gaussian short rate models. The dissertation compares three joint and exact simulation schemes for the short rate and the discount factor in the single-factor case; and two schemes in the multifactor case. We price European floor options and European swaptions using a twofactor Gaussian short rate model and explore the use of variance reduction techniques. We compare the exact and unbiased schemes to other solutions available in the literature: simulating the short rate under the forward measure and approximating the discount factor using quadrature. DA - 2018 DB - OpenUCT DP - University of Cape Town LK - https://open.uct.ac.za PB - University of Cape Town PY - 2018 T1 - Bias-Free Joint Simulation of Multi-Factor Short Rate Models and Discount Factor TI - Bias-Free Joint Simulation of Multi-Factor Short Rate Models and Discount Factor UR - http://hdl.handle.net/11427/29396 ER - | en_ZA |
| dc.identifier.uri | http://hdl.handle.net/11427/29396 | |
| dc.identifier.vancouvercitation | Lopes MF. Bias-Free Joint Simulation of Multi-Factor Short Rate Models and Discount Factor. []. 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/11427/29396 | 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 | Bias-Free Joint Simulation of Multi-Factor Short Rate Models and Discount Factor | |
| dc.type | Master Thesis | |
| dc.type.qualificationlevel | Masters | |
| dc.type.qualificationname | MPhil |