Pricing multi-asset options in exponential levy models
| dc.contributor.advisor | Ouwehand, Peter | |
| dc.contributor.author | Endekovski, Jessica | |
| dc.date.accessioned | 2020-03-02T11:51:29Z | |
| dc.date.available | 2020-03-02T11:51:29Z | |
| dc.date.issued | 2019 | |
| dc.date.updated | 2020-03-02T09:46:16Z | |
| dc.description.abstract | This dissertation looks at implementing exponential Levy models whereby the un- ´ derlyings are driven by Levy processes, which are able to account for stylised facts ´ that traditional models do not, in order to price basket options more efficiently. In particular, two exponential Levy models are implemented and tested: the multi- ´ variate Variance Gamma (VG) model and the multivariate normal inverse Gaussian (NIG) model. Both models are calibrated to real market data and then used to price basket options, where the underlyings are the constituents of the KBW Bank Index. Two pricing methods are also compared: a closed-form (analytical) approximation of the price, derived by Linders and Stassen (2016) and the standard Monte Carlo method. The convergence of the analytical approximation to Monte Carlo prices was found to improve as the time to maturity of the option increased. In comparison to real market data, the multivariate NIG model was able to fit the data more accurately for shorter maturities and the multivariate VG model for longer maturities. However, when looking at Monte Carlo prices, the multivariate VG model was found to outperform the results of the multivariate NIG model, as it was able to converge to Monte Carlo prices to a greater degree. | |
| dc.identifier.apacitation | Endekovski, J. (2019). <i>Pricing multi-asset options in exponential levy models</i>. (). ,Faculty of Commerce ,African Institute of Financial Markets and Risk Management. Retrieved from http://hdl.handle.net/11427/31437 | en_ZA |
| dc.identifier.chicagocitation | Endekovski, Jessica. <i>"Pricing multi-asset options in exponential levy models."</i> ., ,Faculty of Commerce ,African Institute of Financial Markets and Risk Management, 2019. http://hdl.handle.net/11427/31437 | en_ZA |
| dc.identifier.citation | Endekovski, J. 2019. Pricing multi-asset options in exponential levy models. . ,Faculty of Commerce ,African Institute of Financial Markets and Risk Management. http://hdl.handle.net/11427/31437 | en_ZA |
| dc.identifier.ris | TY - Thesis / Dissertation AU - Endekovski, Jessica AB - This dissertation looks at implementing exponential Levy models whereby the un- ´ derlyings are driven by Levy processes, which are able to account for stylised facts ´ that traditional models do not, in order to price basket options more efficiently. In particular, two exponential Levy models are implemented and tested: the multi- ´ variate Variance Gamma (VG) model and the multivariate normal inverse Gaussian (NIG) model. Both models are calibrated to real market data and then used to price basket options, where the underlyings are the constituents of the KBW Bank Index. Two pricing methods are also compared: a closed-form (analytical) approximation of the price, derived by Linders and Stassen (2016) and the standard Monte Carlo method. The convergence of the analytical approximation to Monte Carlo prices was found to improve as the time to maturity of the option increased. In comparison to real market data, the multivariate NIG model was able to fit the data more accurately for shorter maturities and the multivariate VG model for longer maturities. However, when looking at Monte Carlo prices, the multivariate VG model was found to outperform the results of the multivariate NIG model, as it was able to converge to Monte Carlo prices to a greater degree. DA - 2019 DB - OpenUCT DP - University of Cape Town KW - Mathematical Finance LK - https://open.uct.ac.za PY - 2019 T1 - Pricing multi-asset options in exponential levy models TI - Pricing multi-asset options in exponential levy models UR - http://hdl.handle.net/11427/31437 ER - | en_ZA |
| dc.identifier.uri | http://hdl.handle.net/11427/31437 | |
| dc.identifier.vancouvercitation | Endekovski J. Pricing multi-asset options in exponential levy models. []. ,Faculty of Commerce ,African Institute of Financial Markets and Risk Management, 2019 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/31437 | 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 | Pricing multi-asset options in exponential levy models | |
| dc.type | Master Thesis | |
| dc.type.qualificationlevel | Masters | |
| dc.type.qualificationname | MPhil |