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Pricing multi-asset options with levy copulas
Thesis (MSc (Mathematical Sciences))--University of Stellenbosch, 2011.
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| Format: | Thesis |
| Language: | English |
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Stellenbosch : University of Stellenbosch
2011
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| _version_ | 1867613947377483776 |
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| access_status_str | Open Access |
| author | Dushimimana, Jean Claude |
| author2 | Ouwehand, Peter |
| author_browse | Dushimimana, Jean Claude Ouwehand, Peter |
| author_facet | Ouwehand, Peter Dushimimana, Jean Claude |
| author_sort | Dushimimana, Jean Claude |
| collection | Thesis |
| dc_rights_str_mv | University of Stellenbosch |
| description | Thesis (MSc (Mathematical Sciences))--University of Stellenbosch, 2011. |
| format | Thesis |
| id | oai:scholar.sun.ac.za:10019.1/6699 |
| institution | Stellenbosch University (South Africa) |
| language | English |
| last_indexed | 2026-06-10T12:44:14.442Z |
| license_str | Other — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from SUNScholar — Stellenbosch University Repository |
| publishDate | 2011 |
| publishDateRange | 2011 |
| publishDateSort | 2011 |
| publisher | Stellenbosch : University of Stellenbosch |
| publisherStr | Stellenbosch : University of Stellenbosch |
| record_format | dspace |
| source_str | SUNScholar — Stellenbosch University Repository |
| spelling | oai:scholar.sun.ac.za:10019.1/6699 Pricing multi-asset options with levy copulas Dushimimana, Jean Claude Ouwehand, Peter University of Stellenbosch. Faculty of Science. Dept. of Mathematical Sciences. Exotic options Levy asset dynamics Multi-asset options Copulas Dissertations -- Mathematics Theses -- Mathematics Levy processes Asset pricing -- Mathematical models Thesis (MSc (Mathematical Sciences))--University of Stellenbosch, 2011. Imported from http://etd.sun.ac.za ENGLISH ABSTRACT: In this thesis, we propose to use Levy processes to model the dynamics of asset prices. In the first part, we deal with single asset options and model the log stock prices with a Levy process. We employ pure jump Levy processes of infinite activity, in particular variance gamma and CGMY processes. We fit the log-returns of six stocks to variance gamma and CGMY distributions and check the goodness of fit using statistical tests. It is observed that the variance gamma and the CGMY distributions fit the financial market data much better than the normal distribution. Calibration shows that at given maturity time the two models fit into the option prices very well. In the second part, we investigate the effect of dependence structure to multivariate option pricing. We use the new concept of Levy copula introduced in the literature by Tankov [40]. Levy copulas allow us to separate the dependence structure from the behavior of the marginal components. We consider bivariate variance gamma and bivariate CGMY models. To model the dependence structure between underlying assets we use the Clayton Levy copula. The empirical results on six stocks indicate a strong dependence between two different stock prices. Subsequently, we compute bivariate option prices taking into account the dependence structure. It is observed that option prices are highly sensitive to the dependence structure between underlying assets, and neglecting tail dependence will lead to errors in option pricing. AFRIKAANSE OPSOMMING: In hierdie proefskrif word Levy prosesse voorgestel om die bewegings van batepryse te modelleer. Levy prosesse besit die vermoe om die risiko van spronge in ag te neem, asook om die implisiete volatiliteite, wat in finansiele opsie pryse voorkom, te reproduseer. Ons gebruik suiwer–sprong Levy prosesse met oneindige aktiwiteit, in besonder die gamma– variansie (Eng. variance gamma) en CGMY–prosesse. Ons pas die log–opbrengste van ses aandele op die gamma–variansie en CGMY distribusies, en kontroleer die resultate met behulp van statistiese pasgehaltetoetse. Die resultate bevestig dat die gamma–variansie en CGMY modelle die finansiele data beter pas as die normaalverdeling. Kalibrasie toon ook aan dat vir ’n gegewe verstryktyd die twee modelle ook die opsiepryse goed pas. Ons ondersoek daarna die gebruik van Levy prosesse vir opsies op meervoudige bates. Ons gebruik die nuwe konsep van Levy copulas, wat deur Tankov[40] ingelei is. Levy copulas laat toe om die onderlinge afhanklikheid tussen bateprysspronge te skei van die randkomponente. Ons bespreek daarna die simulasie van meerveranderlike Levy prosesse met behulp van Levy copulas. Daarna bepaal ons die pryse van opsies op meervoudige bates in multi–dimensionele exponensiele Levy modelle met behulp van Monte Carlo–metodes. Ons beskou die tweeveranderlike gamma-variansie en – CGMY modelle en modelleer die afhanklikheidsstruktuur tussen onderleggende bates met ’n Levy Clayton copula. Daarna bereken ons tweeveranderlike opsiepryse. Kalibrasie toon aan dat hierdie opsiepryse baie sensitief is vir die afhanlikheidsstruktuur, en dat prysbepaling foutief is as die afhanklikheid tussen die sterte van die onderleggende verdelings verontagsaam word. 2011-02-21T11:22:23Z 2011-03-14T08:32:35Z 2011-02-21T11:22:23Z 2011-03-14T08:32:35Z 2011-03 Thesis http://hdl.handle.net/10019.1/6699 en University of Stellenbosch 140 p. : ill. application/pdf Stellenbosch : University of Stellenbosch |
| spellingShingle | Exotic options Levy asset dynamics Multi-asset options Copulas Dissertations -- Mathematics Theses -- Mathematics Levy processes Asset pricing -- Mathematical models Dushimimana, Jean Claude Pricing multi-asset options with levy copulas |
| title | Pricing multi-asset options with levy copulas |
| title_full | Pricing multi-asset options with levy copulas |
| title_fullStr | Pricing multi-asset options with levy copulas |
| title_full_unstemmed | Pricing multi-asset options with levy copulas |
| title_short | Pricing multi-asset options with levy copulas |
| title_sort | pricing multi asset options with levy copulas |
| topic | Exotic options Levy asset dynamics Multi-asset options Copulas Dissertations -- Mathematics Theses -- Mathematics Levy processes Asset pricing -- Mathematical models |
| url | http://hdl.handle.net/10019.1/6699 |
| work_keys_str_mv | AT dushimimanajeanclaude pricingmultiassetoptionswithlevycopulas |