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Level-dependent volatility in jumping short-rate models
This dissertation constructs a no-arbitrage term structure with deterministically timed randomly sized jumps to price interest rate contingent claims while accounting for level-dependent volatility. This dissertation will price such claims using an implicit finite difference scheme to implement a mo...
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| Format: | Thesis |
| Language: | English |
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Department of Finance and Tax
2025
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| _version_ | 1867613159591772160 |
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| access_status_str | Open Access |
| author | Chitambo, Nigel Elton Nyasha |
| author2 | Backwell, Alexander |
| author_browse | Backwell, Alexander Chitambo, Nigel Elton Nyasha |
| author_facet | Backwell, Alexander Chitambo, Nigel Elton Nyasha |
| author_sort | Chitambo, Nigel Elton Nyasha |
| collection | Thesis |
| description | This dissertation constructs a no-arbitrage term structure with deterministically timed randomly sized jumps to price interest rate contingent claims while accounting for level-dependent volatility. This dissertation will price such claims using an implicit finite difference scheme to implement a modelling framework that prices bonds, bond options and caplets with scheduled shocks to the short-term interest rate to simulate macroeconomic announcements and other sudden developments. This dissertation found that the prices derived from the implicit finite difference scheme agree with those derived from Monte-Carlo simulations and, where applicable, analytical solutions. Moreover, this dissertation shows how innovations in the short-term rate affect the valuations of interest rate contingent claims. |
| format | Thesis |
| id | oai:open.uct.ac.za:11427/41550 |
| institution | University of Cape Town (South Africa) |
| language | eng |
| last_indexed | 2026-06-10T12:31:43.046Z |
| license_str | Not specified — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from UCTD — University of Cape Town Open Access Repository |
| publishDate | 2025 |
| publishDateRange | 2025 |
| publishDateSort | 2025 |
| 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:11427/41550 Level-dependent volatility in jumping short-rate models Chitambo, Nigel Elton Nyasha Backwell, Alexander finance tax This dissertation constructs a no-arbitrage term structure with deterministically timed randomly sized jumps to price interest rate contingent claims while accounting for level-dependent volatility. This dissertation will price such claims using an implicit finite difference scheme to implement a modelling framework that prices bonds, bond options and caplets with scheduled shocks to the short-term interest rate to simulate macroeconomic announcements and other sudden developments. This dissertation found that the prices derived from the implicit finite difference scheme agree with those derived from Monte-Carlo simulations and, where applicable, analytical solutions. Moreover, this dissertation shows how innovations in the short-term rate affect the valuations of interest rate contingent claims. 2025-07-31T13:17:59Z 2025-07-31T13:17:59Z 2025 2025-07-31T13:12:00Z Thesis / Dissertation Masters MPhil http://hdl.handle.net/11427/41550 eng application/pdf Department of Finance and Tax Faculty of Commerce Universiy of Cape Town |
| spellingShingle | finance tax Chitambo, Nigel Elton Nyasha Level-dependent volatility in jumping short-rate models |
| thesis_degree_str | Master's |
| title | Level-dependent volatility in jumping short-rate models |
| title_full | Level-dependent volatility in jumping short-rate models |
| title_fullStr | Level-dependent volatility in jumping short-rate models |
| title_full_unstemmed | Level-dependent volatility in jumping short-rate models |
| title_short | Level-dependent volatility in jumping short-rate models |
| title_sort | level dependent volatility in jumping short rate models |
| topic | finance tax |
| url | http://hdl.handle.net/11427/41550 |
| work_keys_str_mv | AT chitambonigeleltonnyasha leveldependentvolatilityinjumpingshortratemodels |