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Linear-Rational Term Structure Models With Flexible Level-Dependent Volatility
The Linear-Rational Framework for the modelling of interest rates is a framework which allows for the addition of spanned and unspanned factors, while maintaining a lower bound on rates and tractable valuation of interest rate derivatives, particularly swaptions. The advantages of having all these p...
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| Format: | Thesis |
| Language: | English |
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African Institute of Financial Markets and Risk Management
2019
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| _version_ | 1867614447609053184 |
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| access_status_str | Open Access |
| author | Schwellnus, Adrian |
| author2 | Backwell, Alex |
| author_browse | Backwell, Alex Schwellnus, Adrian |
| author_facet | Backwell, Alex Schwellnus, Adrian |
| author_sort | Schwellnus, Adrian |
| collection | Thesis |
| description | The Linear-Rational Framework for the modelling of interest rates is a framework which allows for the addition of spanned and unspanned factors, while maintaining a lower bound on rates and tractable valuation of interest rate derivatives, particularly swaptions. The advantages of having all these properties are significant. This dissertation presents the Linear-Rational Framework, and specializes the factor process to a class of diffusion models which allows for the degree of state dependence of volatility to be estimated. This dissertation then finds that the estimated state dependent volatility structure is significantly different to that of typical models, where it is set it a priori. The effect the added degree of freedom has on the model implied swaption skew is then analysed. |
| format | Thesis |
| id | oai:open.uct.ac.za:11427/29215 |
| institution | University of Cape Town (South Africa) |
| language | eng |
| last_indexed | 2026-06-10T12:52:11.634Z |
| license_str | Not specified — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from UCTD — University of Cape Town Open Access Repository |
| publishDate | 2019 |
| publishDateRange | 2019 |
| publishDateSort | 2019 |
| publisher | African Institute of Financial Markets and Risk Management |
| publisherStr | African Institute of Financial Markets and Risk Management |
| record_format | dspace |
| source_str | UCTD — University of Cape Town Open Access Repository |
| spelling | oai:open.uct.ac.za:11427/29215 Linear-Rational Term Structure Models With Flexible Level-Dependent Volatility Schwellnus, Adrian Backwell, Alex Mathematical Finance The Linear-Rational Framework for the modelling of interest rates is a framework which allows for the addition of spanned and unspanned factors, while maintaining a lower bound on rates and tractable valuation of interest rate derivatives, particularly swaptions. The advantages of having all these properties are significant. This dissertation presents the Linear-Rational Framework, and specializes the factor process to a class of diffusion models which allows for the degree of state dependence of volatility to be estimated. This dissertation then finds that the estimated state dependent volatility structure is significantly different to that of typical models, where it is set it a priori. The effect the added degree of freedom has on the model implied swaption skew is then analysed. 2019-02-04T11:14:50Z 2019-02-04T11:14:50Z 2018 2019-02-04T09:01:53Z Master Thesis Masters MPhil http://hdl.handle.net/11427/29215 eng application/pdf African Institute of Financial Markets and Risk Management Faculty of Commerce University of Cape Town |
| spellingShingle | Mathematical Finance Schwellnus, Adrian Linear-Rational Term Structure Models With Flexible Level-Dependent Volatility |
| thesis_degree_str | Master's |
| title | Linear-Rational Term Structure Models With Flexible Level-Dependent Volatility |
| title_full | Linear-Rational Term Structure Models With Flexible Level-Dependent Volatility |
| title_fullStr | Linear-Rational Term Structure Models With Flexible Level-Dependent Volatility |
| title_full_unstemmed | Linear-Rational Term Structure Models With Flexible Level-Dependent Volatility |
| title_short | Linear-Rational Term Structure Models With Flexible Level-Dependent Volatility |
| title_sort | linear rational term structure models with flexible level dependent volatility |
| topic | Mathematical Finance |
| url | http://hdl.handle.net/11427/29215 |
| work_keys_str_mv | AT schwellnusadrian linearrationaltermstructuremodelswithflexibleleveldependentvolatility |