Full Text Available
Note: Clicking the button above will open the full text document at the original institutional repository in a new window.
Pricing, Calibration and Hedging under the LIBOR model
This dissertation reviews work done by Dun et al. (2001). We present an algorithm for generating the LIBOR forward rates, which encompasses the functionality for pricing interest rate derivatives. We further generalise the algorithm to implement the predictor-corrector method. Calibration is carried...
Saved in:
| Main Author: | |
|---|---|
| Other Authors: | |
| Format: | Thesis |
| Language: | Eng |
| Published: |
Department of Finance and Tax
2024
|
| Subjects: | |
| Tags: |
No Tags, Be the first to tag this record!
|
| _version_ | 1867611355223162880 |
|---|---|
| access_status_str | Open Access |
| author | Menziwa, Singalakha |
| author2 | Ouwehand, Peter |
| author_browse | Menziwa, Singalakha Ouwehand, Peter |
| author_facet | Ouwehand, Peter Menziwa, Singalakha |
| author_sort | Menziwa, Singalakha |
| collection | Thesis |
| description | This dissertation reviews work done by Dun et al. (2001). We present an algorithm for generating the LIBOR forward rates, which encompasses the functionality for pricing interest rate derivatives. We further generalise the algorithm to implement the predictor-corrector method. Calibration is carried out to price swaptions using the Black-76 and LIBOR methods, and the hedging strategies implied by both methods are considered. We aim to determine whether the theoretical and computational overhead associated with hedging swaptions using the LIBOR method improves the hedging accuracy over the more straightforward Black-76 method. The simulation is conducted within the LIBOR model framework. While inconsistent with the model assumptions, the Black method performed equally well as the LIBOR method as we obtained similar hedging profit and loss distributions even at high portfolio rebalancing frequencies. |
| format | Thesis |
| id | oai:open.uct.ac.za:11427/40257 |
| institution | University of Cape Town (South Africa) |
| language | Eng |
| license_str | Not specified — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from UCTD — University of Cape Town Open Access Repository |
| publishDate | 2024 |
| publishDateRange | 2024 |
| publishDateSort | 2024 |
| publisher | Department of Finance and Tax |
| publisherStr | Department of Finance and Tax |
| record_format | dspace |
| source_str | UCTD — University of Cape Town Open Access Repository |
| spelling | oai:open.uct.ac.za:11427/40257 Pricing, Calibration and Hedging under the LIBOR model Menziwa, Singalakha Ouwehand, Peter Finance and Tax This dissertation reviews work done by Dun et al. (2001). We present an algorithm for generating the LIBOR forward rates, which encompasses the functionality for pricing interest rate derivatives. We further generalise the algorithm to implement the predictor-corrector method. Calibration is carried out to price swaptions using the Black-76 and LIBOR methods, and the hedging strategies implied by both methods are considered. We aim to determine whether the theoretical and computational overhead associated with hedging swaptions using the LIBOR method improves the hedging accuracy over the more straightforward Black-76 method. The simulation is conducted within the LIBOR model framework. While inconsistent with the model assumptions, the Black method performed equally well as the LIBOR method as we obtained similar hedging profit and loss distributions even at high portfolio rebalancing frequencies. 2024-07-04T13:33:31Z 2024-07-04T13:33:31Z 2024 2024-07-04T13:29:37Z Thesis / Dissertation Masters MPhil http://hdl.handle.net/11427/40257 Eng application/pdf Department of Finance and Tax Faculty of Commerce |
| spellingShingle | Finance and Tax Menziwa, Singalakha Pricing, Calibration and Hedging under the LIBOR model |
| thesis_degree_str | Master's |
| title | Pricing, Calibration and Hedging under the LIBOR model |
| title_full | Pricing, Calibration and Hedging under the LIBOR model |
| title_fullStr | Pricing, Calibration and Hedging under the LIBOR model |
| title_full_unstemmed | Pricing, Calibration and Hedging under the LIBOR model |
| title_short | Pricing, Calibration and Hedging under the LIBOR model |
| title_sort | pricing calibration and hedging under the libor model |
| topic | Finance and Tax |
| url | http://hdl.handle.net/11427/40257 |
| work_keys_str_mv | AT menziwasingalakha pricingcalibrationandhedgingunderthelibormodel |