Multi-curve bootstrapping and implied discounting curves in illiquid markets

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dc.contributor.advisorTaylor, Daviden_ZA
dc.contributor.authorSender, Nina Alexandraen_ZA
dc.date.accessioned2017-09-28T05:29:44Z
dc.date.available2017-09-28T05:29:44Z
dc.date.issued2017en_ZA
dc.description.abstractThe credit and liquidity crisis of 2007 has triggered a number of inconsistencies in the interest rate market, questioning some of the standard methods and assumptions used to price and hedge interest rate derivatives. It has been shown that using a single risk-free curve (constructed from market instruments referencing underlying rates of varying tenors) to forecast and discount cash flows is not theoretically correct. Standard market practice has evolved to a multi-curve approach, using different curves to forecast and discount cash flows. The risk-free discount curve is proxied by the Overnight-Indexed Swap (OIS) curve. In South Africa there is no liquid market for OIS. In this dissertation a method is developed to estimate the ZAR OIS curve. A cointegration relationship between the SAFEX Overnight Rate, and the 3-month JIBAR rate is shown to exist. This relationship is used in a dual bootstrap algorithm, to simultaneously estimate the ZAR OIS curve and 3-month JIBAR tenor curve, while maintaining arbitrage relationships. The tractability of this method is shown, by pricing options written on ZAR OIS.en_ZA
dc.identifier.apacitationSender, N. A. (2017). <i>Multi-curve bootstrapping and implied discounting curves in illiquid markets</i>. (Thesis). University of Cape Town ,Faculty of Commerce ,Division of Actuarial Science. Retrieved from http://hdl.handle.net/11427/25447en_ZA
dc.identifier.chicagocitationSender, Nina Alexandra. <i>"Multi-curve bootstrapping and implied discounting curves in illiquid markets."</i> Thesis., University of Cape Town ,Faculty of Commerce ,Division of Actuarial Science, 2017. http://hdl.handle.net/11427/25447en_ZA
dc.identifier.citationSender, N. 2017. Multi-curve bootstrapping and implied discounting curves in illiquid markets. University of Cape Town.en_ZA
dc.identifier.ris TY - Thesis / Dissertation AU - Sender, Nina Alexandra AB - The credit and liquidity crisis of 2007 has triggered a number of inconsistencies in the interest rate market, questioning some of the standard methods and assumptions used to price and hedge interest rate derivatives. It has been shown that using a single risk-free curve (constructed from market instruments referencing underlying rates of varying tenors) to forecast and discount cash flows is not theoretically correct. Standard market practice has evolved to a multi-curve approach, using different curves to forecast and discount cash flows. The risk-free discount curve is proxied by the Overnight-Indexed Swap (OIS) curve. In South Africa there is no liquid market for OIS. In this dissertation a method is developed to estimate the ZAR OIS curve. A cointegration relationship between the SAFEX Overnight Rate, and the 3-month JIBAR rate is shown to exist. This relationship is used in a dual bootstrap algorithm, to simultaneously estimate the ZAR OIS curve and 3-month JIBAR tenor curve, while maintaining arbitrage relationships. The tractability of this method is shown, by pricing options written on ZAR OIS. DA - 2017 DB - OpenUCT DP - University of Cape Town LK - https://open.uct.ac.za PB - University of Cape Town PY - 2017 T1 - Multi-curve bootstrapping and implied discounting curves in illiquid markets TI - Multi-curve bootstrapping and implied discounting curves in illiquid markets UR - http://hdl.handle.net/11427/25447 ER - en_ZA
dc.identifier.urihttp://hdl.handle.net/11427/25447
dc.identifier.vancouvercitationSender NA. Multi-curve bootstrapping and implied discounting curves in illiquid markets. [Thesis]. University of Cape Town ,Faculty of Commerce ,Division of Actuarial Science, 2017 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/25447en_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.titleMulti-curve bootstrapping and implied discounting curves in illiquid marketsen_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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