South African Inflation Modelling Under the HJM Framework
| dc.contributor.advisor | Mahomed, Obeid | |
| dc.contributor.author | Rizzo, Massimo | |
| dc.date.accessioned | 2023-04-20T10:33:16Z | |
| dc.date.available | 2023-04-20T10:33:16Z | |
| dc.date.issued | 2022 | |
| dc.date.updated | 2023-04-20T08:33:02Z | |
| dc.description.abstract | Inflation modelling is typically done following an econometric approach, however this results in models being constructed that are not consistent with the observable bond market and as such they cannot be used in hedging market instruments or in pricing inflation-linked derivatives. Jarrow and Yildirim (2003) were one of the first to propose a framework under which nominal and real forward rates and an inflation index could be jointly modelled in a consistent manner, based on the Heath-Jarrow-Morton (HJM) framework as first developed by Heath et al. (1992). They showed that under this framework it is possible to recover observed nominal and inflation-linked bond prices, hedge these instruments, and price related inflation-linked derivatives. A shortfall of this framework however, as critiqued by Mercurio (2005) and Belgrade et al. (2004), is that it depends entirely on non observable parameters. As such, estimating the parameters of a model constructed under this framework is non-trivial. This dissertation applies the approach detailed by Jarrow and Yildirim (2003) to construct a model that fits the South African context, and makes use of the Kalman filter, as originally documented by Kalman (1960), to overcome the issues that arise in parameter estimation. Using the model constructed, forecasts of future inflation in South Africa are produced. | |
| dc.identifier.apacitation | Rizzo, M. (2022). <i>South African Inflation Modelling Under the HJM Framework</i>. (). ,Faculty of Commerce ,Department of Finance and Tax. Retrieved from http://hdl.handle.net/11427/37775 | en_ZA |
| dc.identifier.chicagocitation | Rizzo, Massimo. <i>"South African Inflation Modelling Under the HJM Framework."</i> ., ,Faculty of Commerce ,Department of Finance and Tax, 2022. http://hdl.handle.net/11427/37775 | en_ZA |
| dc.identifier.citation | Rizzo, M. 2022. South African Inflation Modelling Under the HJM Framework. . ,Faculty of Commerce ,Department of Finance and Tax. http://hdl.handle.net/11427/37775 | en_ZA |
| dc.identifier.ris | TY - Master Thesis AU - Rizzo, Massimo AB - Inflation modelling is typically done following an econometric approach, however this results in models being constructed that are not consistent with the observable bond market and as such they cannot be used in hedging market instruments or in pricing inflation-linked derivatives. Jarrow and Yildirim (2003) were one of the first to propose a framework under which nominal and real forward rates and an inflation index could be jointly modelled in a consistent manner, based on the Heath-Jarrow-Morton (HJM) framework as first developed by Heath et al. (1992). They showed that under this framework it is possible to recover observed nominal and inflation-linked bond prices, hedge these instruments, and price related inflation-linked derivatives. A shortfall of this framework however, as critiqued by Mercurio (2005) and Belgrade et al. (2004), is that it depends entirely on non observable parameters. As such, estimating the parameters of a model constructed under this framework is non-trivial. This dissertation applies the approach detailed by Jarrow and Yildirim (2003) to construct a model that fits the South African context, and makes use of the Kalman filter, as originally documented by Kalman (1960), to overcome the issues that arise in parameter estimation. Using the model constructed, forecasts of future inflation in South Africa are produced. DA - 2022_ DB - OpenUCT DP - University of Cape Town KW - Mathematical Finance LK - https://open.uct.ac.za PY - 2022 T1 - South African Inflation Modelling Under the HJM Framework TI - South African Inflation Modelling Under the HJM Framework UR - http://hdl.handle.net/11427/37775 ER - | en_ZA |
| dc.identifier.uri | http://hdl.handle.net/11427/37775 | |
| dc.identifier.vancouvercitation | Rizzo M. South African Inflation Modelling Under the HJM Framework. []. ,Faculty of Commerce ,Department of Finance and Tax, 2022 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/37775 | en_ZA |
| dc.language.rfc3066 | eng | |
| dc.publisher.department | Department of Finance and Tax | |
| dc.publisher.faculty | Faculty of Commerce | |
| dc.subject | Mathematical Finance | |
| dc.title | South African Inflation Modelling Under the HJM Framework | |
| dc.type | Master Thesis | |
| dc.type.qualificationlevel | Masters | |
| dc.type.qualificationlevel | MPhil |