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Modelling the South African Inter-Bank Interest Rate Market using a Log-Normal Rational Pricing Kernel Model
This dissertation examines the performance of two log-normal rational pricing kernel models and their calibration to the South African Inter-bank interest rate market. We investigate using Monte-Carlo simulation to price caps, floors and swaptions. Model-performance for both models was tested on sin...
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| Format: | Thesis |
| Language: | English |
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African Institute of Financial Markets and Risk Management
2020
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| _version_ | 1867613383068483584 |
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| access_status_str | Open Access |
| author | Hammond, Graeme |
| author2 | Taylor, David |
| author_browse | Hammond, Graeme Taylor, David |
| author_facet | Taylor, David Hammond, Graeme |
| author_sort | Hammond, Graeme |
| collection | Thesis |
| description | This dissertation examines the performance of two log-normal rational pricing kernel models and their calibration to the South African Inter-bank interest rate market. We investigate using Monte-Carlo simulation to price caps, floors and swaptions. Model-performance for both models was tested on single-strikes and entire volatility surfaces. Our results show that a one-factor model cannot reproduce the volatility smile present in the caps/floor market but can reproduce the at-the money swaption volatility surface. The two-factor model produces a better calibration to the volatility smile and captures most of the characteristics of the volatility surface. |
| format | Thesis |
| id | oai:open.uct.ac.za:11427/31423 |
| institution | University of Cape Town (South Africa) |
| language | eng |
| last_indexed | 2026-06-10T12:35:16.409Z |
| license_str | Not specified — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from UCTD — University of Cape Town Open Access Repository |
| publishDate | 2020 |
| publishDateRange | 2020 |
| publishDateSort | 2020 |
| 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:11427/31423 Modelling the South African Inter-Bank Interest Rate Market using a Log-Normal Rational Pricing Kernel Model Hammond, Graeme Taylor, David Mahomed, Obeid Mathematical Finance This dissertation examines the performance of two log-normal rational pricing kernel models and their calibration to the South African Inter-bank interest rate market. We investigate using Monte-Carlo simulation to price caps, floors and swaptions. Model-performance for both models was tested on single-strikes and entire volatility surfaces. Our results show that a one-factor model cannot reproduce the volatility smile present in the caps/floor market but can reproduce the at-the money swaption volatility surface. The two-factor model produces a better calibration to the volatility smile and captures most of the characteristics of the volatility surface. 2020-03-02T08:55:37Z 2020-03-02T08:55:37Z 2019 2020-03-02T08:35:42Z Master Thesis Masters MPhil http://hdl.handle.net/11427/31423 eng application/pdf African Institute of Financial Markets and Risk Management Faculty of Commerce |
| spellingShingle | Mathematical Finance Hammond, Graeme Modelling the South African Inter-Bank Interest Rate Market using a Log-Normal Rational Pricing Kernel Model |
| thesis_degree_str | Master's |
| title | Modelling the South African Inter-Bank Interest Rate Market using a Log-Normal Rational Pricing Kernel Model |
| title_full | Modelling the South African Inter-Bank Interest Rate Market using a Log-Normal Rational Pricing Kernel Model |
| title_fullStr | Modelling the South African Inter-Bank Interest Rate Market using a Log-Normal Rational Pricing Kernel Model |
| title_full_unstemmed | Modelling the South African Inter-Bank Interest Rate Market using a Log-Normal Rational Pricing Kernel Model |
| title_short | Modelling the South African Inter-Bank Interest Rate Market using a Log-Normal Rational Pricing Kernel Model |
| title_sort | modelling the south african inter bank interest rate market using a log normal rational pricing kernel model |
| topic | Mathematical Finance |
| url | http://hdl.handle.net/11427/31423 |
| work_keys_str_mv | AT hammondgraeme modellingthesouthafricaninterbankinterestratemarketusingalognormalrationalpricingkernelmodel |