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Dissertations / Theses on the topic 'Pricing of Securities'
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Xu, Qing. "Pricing multi-state lookback-style derivatives /." View abstract or full-text, 2009. http://library.ust.hk/cgi/db/thesis.pl?MATH%202009%20XU.
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Hutton, J. P. "Fast valuation of derivative securities." Thesis, University of Essex, 1995. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.282493.
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Khadem, Varqa. "Pricing corporate securities and stochastic differential games." Thesis, University of Oxford, 2001. https://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.393555.
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Kazi, Mazharul Haque. "Systematic risk factors in Australian security pricing /." View thesis, 2004. http://library.uws.edu.au/adt-NUWS/public/adt-NUWS20050913.105500/index.html.
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Thesis (Ph.D.) -- University of Western Sydney, 2004."A thesis submitted in fulfilment of requirements for the degree of Doctor of Philosophy in Economics and Finance" Bibliography : leaves 211-226.
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Wong, Chun-keung Damian. "Pricing of initial public offerings in Hong Kong /." Hong Kong : University of Hong Kong, 1998. http://sunzi.lib.hku.hk/hkuto/record.jsp?B19878515.
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Milic, Ivona. "Pricing and hedging derivative securities with interrupted trading." Thesis, Imperial College London, 2002. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.268675.
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黃瑞斌 and Sui-pan Ben Wong. "Pricing of mortgage-backed securities via genetic programming." Thesis, The University of Hong Kong (Pokfulam, Hong Kong), 2001. http://hub.hku.hk/bib/B31225342.
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Wong, Sui-pan Ben. "Pricing of mortgage-backed securities via genetic programming." Hong Kong : University of Hong Kong, 2001. http://sunzi.lib.hku.hk/hkuto/record.jsp?B23273343.
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Acheampong, Osman K. "Pricing mortgage-backed securities using prepayment functions and pathwise Monte Carlo simulation." Link to electronic thesis, 2003. http://www.wpi.edu/Pubs/ETD/Available/etd-0430103-010005.
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Staunton, Michael Douglas. "Pricing of airline assets and their valuation by securities markets." Thesis, London Business School (University of London), 1992. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.294540.
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Pappadopoulos, George J. (George James). "A Monte-Carlo pricing model for commercial mortgage-backed securities." Thesis, Massachusetts Institute of Technology, 1995. http://hdl.handle.net/1721.1/69347.
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Twarog, Marek B. "Pricing security derivatives under the forward measure." Link to electronic thesis, 2007. http://www.wpi.edu/Pubs/ETD/Available/etd-053007-142223/.
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Wang, Pengguo. "Valuation of risky securities with long-short spreads and taxes." Thesis, University of Strathclyde, 1998. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.366693.
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Padmanabhan, Prasad. "Three essays in international asset pricing." Thesis, McGill University, 1988. http://digitool.Library.McGill.CA:80/R/?func=dbin-jump-full&object_id=75875.
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This dissertation consists of three essays in international asset pricing. The first essay develops a model where investors face barriers to foreign portfolio investment. Using the standard mean-variance framework, risk return relationships for all securities are developed. It is also shown that: (1) previous models adopting this approach are special cases of this model, and (2) all investors generally prefer complete removal of barriers over other market structures. Essay #2 empirically explores the issue of the degree of segmentation of the international capital market for risky securities. Using the 'emerging market' (EM) data base, it is shown that the international capital market is neither completely segmented nor completely integrated. Finally, the third essay investigates the relationship between stock returns and inflation for the EM securities. It is shown that stock returns are positively (negatively) related to inflation, for the group of high (low) inflation countries in the sample.
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Zheng, Wendong. "Hedging and pricing of constant maturity swap derivatives /." View abstract or full-text, 2009. http://library.ust.hk/cgi/db/thesis.pl?MATH%202009%20ZHENG.
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Matsumoto, Manabu. "Options on portfolios of options and multivariate option pricing and hedging." Thesis, Imperial College London, 2000. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.324627.
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Li, Xiaofei 1972. "Three essays on the pricing of fixed income securities with credit risk." Thesis, McGill University, 2004. http://digitool.Library.McGill.CA:80/R/?func=dbin-jump-full&object_id=84523.
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This thesis studies the impacts of credit risk, or the risk of default, on the pricing of fixed income securities. It consists of three essays. The first essay extends the classical corporate debt pricing model in Merton (1974) to incorporate stochastic volatility (SV) in the underlying firm asset value and derive a closed-form solution for the price of corporate bond. Simulation results show that the SV specification for firm asset value greatly increases the resulting credit spread levels. Therefore, the SV model addresses one major deficiency of the Merton-type models: namely, at short maturities the Merton model is unable to generate credit spreads high enough to be compatible with those observed in the market. In the second essay, we develop a two-factor affine model for the credit spreads on corporate bonds. The first factor can be interpreted as the level of the spread, and the second factor is the volatility of the spread. Our empirical results show that the model is successful at fitting actual corporate bond credit spreads. In addition, key properties of actual credit spreads are better captured by the model. Finally, the third essay proposes a model of interest rate swap spreads. The model accommodates both the default risk inherent in swap contracts and the liquidity difference between the swap and Treasury markets. The default risk and liquidity components of swap spreads are found to behave very differently: first, the default risk component is positively related to the riskless interest rate, whereas the liquidity component is negatively correlated with the riskless interest rate; second, although default risk accounts for the largest share of the levels of swap spreads, the liquidity component is much more volatile; and finally, while the default risk component has been historically positive, the liquidity component was negative for much of the 1990s and has become positive since the financial market turmoil in 1998.
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Lee, Michael Shou-Cheng Banking & Finance Australian School of Business UNSW. "Pricing and hedging derivative securities in a regime-switching model with state-dependent jumps." Publisher:University of New South Wales. Banking & Finance, 2007. http://handle.unsw.edu.au/1959.4/41509.
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In this thesis we discuss option pricing and hedging under regime switching models. To the standard model we add jumps of various types. In particular, we consider a jump that is synchronous with a change in the regime state. Thus, for example, we can define a process such that the stock price moves to a high volatility state and simultaneously has a large downward jump in returns. This type of model is consistent with market experience. We derive the compensator for our synchronous jumps and price options on such a price process using Fourier transforms. We also test the model on S&P futures options and show that it performs significantly better than a jump diffusion model. Furthermore, we look at the problem of hedging options under finitely many regime states and with finitely many possible jump sizes. We find risk-free hedge portfolios using the risk-free asset, the underlying asset, and finitely many options. Our risk-free trading strategy is consistent with any equivalent martingale measure, and so does not in itself specify which measure should be used to price options.
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Dietrich-Campbell, Bruce John. "Two topics in Finance: 1. Welfare aspects of an asymmetric information rational expectations model : 2. Bond option pricing, empirical evidence." Thesis, University of British Columbia, 1985. http://hdl.handle.net/2429/25565.
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In part 1 of this study I examine several models of competitive markets in which a group of uninformed traders uses the equilibrium price of a traded asset as an indirect source of information known to a group of informed traders. Four different models are compared in two homogeneous information cases plus one asymmetric information case, revealing a) an allocative efficiency benefit resulting from the opportunity to trade current consumption for future consumption, b) a 'dealer' benefit accruing to traders who are able to observe and act on demand fluctuations not apparent to other traders, c) a 'hedging' benefit accruing to all traders, and d) a loss of hedging benefits due to information dissemination before hedge trading can take place. The effect of an increase in precision of information given to informed traders is calculated for the above factors and for net welfare.
In part 2, a two-factor model using the instantaneous rate of interest and the return on a consol bond to describe the term structure of interest rates - the Brennan-Schwartz model - is used to derive theoretical prices for American call and put options on U.S. government bonds and treasury bills. These model prices are then compared with market prices. The theoretical model used to value the debt options also provides hedge ratios which may be used to construct zero-investment portfolios which, in theory, are perfectly riskless. Several trading strategies based on these 'riskless' portfolios are examined.Business, Sauder School of
Graduate
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Levendorskii, Sergei Z., and Svetlana I. Boyarchenko. "On rational pricing of derivative securities for a familiy of non-Gaussian processes." Universität Potsdam, 1998. http://opus.kobv.de/ubp/volltexte/2008/2519/.
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Linear and non-linear analogues of the Black-Scholes equation are derived when
shocks can be described by a truncated Lévy process.
A linear equation is derived under the perfect correlation assumption on returns for a derivative security and a stock, and its solutions for European put and call options are obtained. It is also shown that the solution violates the perfect correlation assumption unless a process is gaussian. Thus, for a family of truncated Lévy distributions, the perfect hedging is impossible even in the continuous time limit.
A second linear analogue of the Black-Scholes equation is obtained by constructing a portfolio which eliminates fluctuations of the first order and assuming that the portfolio is risk-free; it is shown that this assumption fails unless a process is gaussian.
It is shown that the di erence between solutions to the linear analogues of the Black-Scholes equations and solutions to the Black-Scholes equations are sizable.
The equations and solutions can be written in a discretized approximate form which uses an observed probability distribution only.
Non-linear analogues for the Black-Scholes equation are derived from the non-arbitrage condition, and approximate formulas for solutions of these equations are suggested.
Assuming that a linear generalization of the Black-Scholes equation holds, we derive an explicit pricing formula for the perpetual American put option and produce numerical results which show that the difference between our result and the classical Merton's formula obtained for gaussian processes can be substantial. Our formula uses an observed distribution density, under very weak assumptions on the latter.
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Leung, Seng Yuen. "Analysis of counterparty risks and derivative pricing under stochastic volatility /." View abstract or full-text, 2004. http://library.ust.hk/cgi/db/thesis.pl?MATH%202004%20LEUNG.
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Thesis (Ph. D.)--Hong Kong University of Science and Technology, 2004.Includes bibliographical references (leaves 120-131). Also available in electronic version. Access restricted to campus users.
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Loriato, Leandro Amato. "Convertible bond pricing: a Monte Carlo approach." reponame:Repositório Institucional do BNDES, 2014. https://web.bndes.gov.br/bib/jspui/handle/1408/7001.
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Convertible Bonds are interesting hybrid instruments with debt- and equity-like features that have received increasing attention for the last years, especially after the sub-prime mortgage crisis in 2008. This work aims at presenting the main concept behind those instruments, its related features and pricing issues, exhibiting in a constructive manner, from simple products to complex ones, how one may model and price them. To deal with the possibility of American exercises, we implement least-squared and hedged Monte Carlo pricing methods. A clear, flexible, extensible and ready-to-use code implementation for the proposed pricing framework is provided together with some examples of contracts. A discussion of attained numerical results is also presented.Debêntures Conversíveis são interessantes instrumentos híbridos com características de títulos de dívida e de ações que têm recebido atenção crescente nos últimos anos, especialmente após a crise imobiliária americana em 2008. Esse trabalho tem por objetivo apresentar o conceito principal por trás desses instrumentos, suas características e dificuldades de precificação, exibindo de forma construtiva, de produtos simples a outros mais complexos, como alguém consegue modelar e precificá-los. Para lidar com a possibilidade de exercícios Americanos, implementamos os métodos de precificação de Monte Carlo com mínimos quadrados e com cobertura de risco. Uma implementação clara, flexível, extensível e pronta para uso para o framework de precificação proposto é apresentada com alguns exemplos de contratos. Uma discussão de resultados numéricos encontrados também é apresentada.
Dissertação (mestrado) - Instituto Nacional de Matemática Pura e Aplicada, Rio de Janeiro, 2014.
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McAnally, Robert C. "Numerical techniques for convertible bond pricing and a graph-theoretic approach to contingent claims analysis." Thesis, Imperial College London, 1995. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.267094.
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Wong, Chun-keung Damian, and 王振強. "Pricing of initial public offerings in Hong Kong." Thesis, The University of Hong Kong (Pokfulam, Hong Kong), 1998. http://hub.hku.hk/bib/B31269394.
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Glover, Elistan Nicholas. "Analytic pricing of American put options." Thesis, Rhodes University, 2009. http://hdl.handle.net/10962/d1002804.
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American options are the most commonly traded financial derivatives in the market. Pricing these options fairly, so as to avoid arbitrage, is of paramount importance. Closed form solutions for American put options cannot be utilised in practice and so numerical techniques are employed. This thesis looks at the work done by other researchers to find an analytic solution to the American put option pricing problem and suggests a practical method, that uses Monte Carlo simulation, to approximate the American put option price. The theory behind option pricing is first discussed using a discrete model. Once the concepts of arbitrage-free pricing and hedging have been dealt with, this model is extended to a continuous-time setting. Martingale theory is introduced to put the option pricing theory in a more formal framework. The construction of a hedging portfolio is discussed in detail and it is shown how financial derivatives are priced according to a unique riskneutral probability measure. Black-Scholes model is discussed and utilised to find closed form solutions to European style options. American options are discussed in detail and it is shown that under certain conditions, American style options can be solved according to closed form solutions. Various numerical techniques are presented to approximate the true American put option price. Chief among these methods is the Richardson extrapolation on a sequence of Bermudan options method that was developed by Geske and Johnson. This model is extended to a Repeated-Richardson extrapolation technique. Finally, a Monte Carlo simulation is used to approximate Bermudan put options. These values are then extrapolated to approximate the price of an American put option. The use of extrapolation techniques was hampered by the presence of non-uniform convergence of the Bermudan put option sequence. When convergence was uniform, the approximations were accurate up to a few cents difference.
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Zeng, Zhenxing. "A study on the pricing efficiency of Hong Kong's index derivative warrant market." HKBU Institutional Repository, 2009. http://repository.hkbu.edu.hk/etd_ra/1198.
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Stremme, Alexander. "Pricing and hedging of derivative securities : some effects of asymmetric information and market power." Thesis, London School of Economics and Political Science (University of London), 1999. http://etheses.lse.ac.uk/2278/.
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This thesis consists of a collection of studies investigating various aspects of the interplay between the markets for derivative securities and their respective underlying assets in the presence of market imperfections. The classic theory of derivative pricing and hedging hinges on three rather unrealistic assumptions regarding the market for the underlying asset. Markets are assumed to be perfectly elastic, complete and frictionless. This thesis studies some effects of relaxing one or more of these assumptions. Chapter 1 provides an introduction to the thesis, details the structure of what follows, and gives a selective review of the relevant literature. Chapter 2 focuses on the effects that the implementation of hedging strategies has on equilibrium asset prices when markets are imperfectly elastic. The results show that the feedback effect caused by such hedging strategies generates excess volatility of equilibrium asset prices, thus violating the very assumptions from which these strategies are derived. However, it is shown that hedging is nonetheless possible, albeit at a slightly higher price. In Chapter 3, a model is developed which describes equilibrium asset prices when market participants use technical trading rules. The results confirm that technical trading leads to the emergence of speculative price "bubbles". However, it is shown that although technical trading rules are irrational ex-ante, they turn out to be profitable ex-post. In Chapter 4, a general framework is developed in which the optimal trading behaviour of a large, informed trader can be studied in an environment where markets are imperfectly elastic. It is shown how the optimal trading pattern changes when the large trader is allowed to hold options written on the traded asset. In Chapter 5, the results of the preceding chapter are used to study the interplay between options markets and the markets for the underlying assets when prices are set by a market maker. It turns out that the existence of the option creates an incentive for the informed trader to manipulate markets, which implies that equilibrium on both markets can only exist when option prices are adjusted to reflect this incentive. This requirement of price alignment explains the "smile" pattern of implied volatility, an empirically observed phenomenon that has recently been the focus of extensive research. Chapter 6 finally addresses recent proposals by some researchers suggesting that central banks should issue options in order to stabilise exchange rates. The argument, in line with the findings of Chapter 2, is based on the fact that hedging a long option position requires countercyclical trading that would reduce volatility. However, the results of Chapter 6 show that the option creates an incentive for market manipulation which, rather than protecting against speculative attacks, in fact creates an additional vehicle for such attacks. Chapter 7 concludes.
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Chu, Chi Chiu. "Pricing models of equity-linked insurance products and LIBOR exotic derivatives /." View abstract or full-text, 2005. http://library.ust.hk/cgi/db/thesis.pl?MATH%202005%20CHU.
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Lee, Sungjoo. "Pricing Path-Dependent Derivative Securities Using Monte Carlo Simulation and Intra-Market Statistical Trading Model." Diss., Georgia Institute of Technology, 2004. http://hdl.handle.net/1853/4914.
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This thesis is composed of two parts. The first parts deals with a technique for pricing American-style contingent options. The second part details a statistical arbitrage model using statistical process control approaches.
We propose a novel simulation approach for pricing American-style contingent claims. We develop an adaptive policy search algorithm for obtaining the optimal policy in exercising an American-style option. The option price is first obtained by estimating the optimal option exercising policy and then evaluating the option with the estimated policy through simulation. Both high-biased and low-biased estimators of the option price are obtained. We show that the proposed algorithm leads to convergence to the true optimal policy with probability one. This policy search algorithm requires little knowledge about the structure of the optimal policy and can be naturally implemented using parallel computing methods. As illustrative examples, computational results on pricing regular American options and American-Asian options are reported and they indicate that our algorithm is faster than certain alternative American option pricing algorithms reported in the literature.
Secondly, we investigate arbitrage opportunities arising from continuous monitoring of the price difference of highly correlated assets. By differentiating between two assets, we can separate common macroeconomic factors that influence the asset price movements from an idiosyncratic condition that can be monitored very closely by itself. Since price movements are in line with macroeconomic conditions such as interest rates and economic cycles, we can easily see out of the normal behaviors on the price changes. We apply a statistical process control approach for monitoring time series with the serially correlated data. We use various variance estimators to set up and establish trading strategy thresholds.
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Richardson, Lyle. "Liquid yield option notes (LYONS) : corporate objectives, valuation and pricing." Honors in the Major Thesis, University of Central Florida, 2001. http://digital.library.ucf.edu/cdm/ref/collection/ETH/id/299.
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This item is only available in print in the UCF Libraries. If this is your Honors Thesis, you can help us make it available online for use by researchers around the world by following the instructions on the distribution consent form at http://library.ucf.edu/Systems/DigitalInitiatives/DigitalCollections/InternetDistributionConsentAgreementForm.pdf You may also contact the project coordinator, Kerri Bottorff, at kerri.bottorff@ucf.edu for more information.Bachelors
Business Administration
Finance
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Garisch, Simon Edwin. "Convertible bond pricing with stochastic volatility : a thesis submitted to the Victoria University of Wellington in fulfilment of the requirements for the degree of Masters in Finance /." ResearchArchive@Victoria e-thesis, 2009. http://hdl.handle.net/10063/1100.
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Wu, Andrew Man Kit. "Efficient lattice methods for pricing interest rate options and other derivative securities under stochastic volatility." Thesis, University of Strathclyde, 2002. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.248776.
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Ampadu, Ebenezer. "Implementation of some finite difference methods for the pricing of derivatives using C++ programming." Link to electronic thesis, 2007. http://www.wpi.edu/Pubs/ETD/Available/etd-051807-164436/.
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Zhang, Jianing. "Non-standard backward stochastic differential equations and multiple optimal stopping problems with applications to securities pricing." Doctoral thesis, Humboldt-Universität zu Berlin, Mathematisch-Naturwissenschaftliche Fakultät II, 2013. http://dx.doi.org/10.18452/16713.
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Zentraler Gegenstand dieser Dissertation ist die Entwicklung von mathematischen Methoden zur Charakterisierung und Implementierung von optimalen Investmentstrategien eines Kleininvestors auf einem Finanzmarkt. Zur Behandlung dieser Probleme ziehen wir als Hauptwerkzeug Stochastische Rückwärts-Differenzialgleichungen (BSDEs) mit nicht-linearen Drifts heran. Diese Nicht-Lineariäten ordnen sie außerhalb der Standardklasse der Lipschitz-stetigen BSDEs ein und treten häufig in finanzmathematischen Kontrollproblemen auf. Wir charakterisieren das optimale Vermögen und die optimale Investmentstrategie eines Kleininvestors mit Hilfe einer sog. Stochastischen Vorwärts-Rückwärts-Differenzialgleichung (FBSDE), einem System bestehend aus einer stochastischen Vorwärtsgleichung, die vollständig gekoppelt ist an eine Rückwärtsgleichung. Die Festlegung bestimmter Nutzenfunktionen führt uns schließlich zu einer weiteren Klasse von nicht-standard BSDEs, die in unmittelbarem Zusammenhang zu dem sog. Ansatz der stochastischen partiellen Rückwärts-Differenzialgleichungen (BSPDEs) steht. Anschließend entwickeln wir eine Methode zur numerischen Behandlung von quadratischen BSDEs, die auf einem stochastischen Analogon der Cole-Hopf-Transformation basiert. Wir studieren weiterhin eine Klasse von BSDEs, deren Drifts explizite Pfadabhängigkiten aufweisen und leiten mehrere analytische Eigenschaften her. Schließlich studieren wir Dualdarstellungen für Optimalen Mehrfachstoppprobleme. Wir leiten Martingal-Dualdarstellungen her, die die Grundlage für die Entwicklung von Regressions-basierten Monte Carlo Simulationsalgorithmen bilden, die schnell und effektiv untere und obere Schranken berechnen.This thesis elaborates on the wealth maximization problem of a small investor who invests in a financial market. Key tools for our studies come across in the form of several classes of BSDEs with particular non-linearities, casting them outside the standard class of Lipschitz continuous BSDEs. We first give a characterization of a small investor''s optimal wealth and its associated optimal strategy by means of a systems of coupled equations, a forward-backward stochastic differential equation (FBSDE) with non-Lipschitz coefficients, where the backward component is of quadratic growth. We then examine how specifying concrete utility functions give rise to another class of non-standard BSDEs. In this context, we also investigate the relationship to a modeling approach based on random fields techniques, known by now as the backward stochastic partial differential equations (BSPDEs) approach. We continue with the presentation of a numerical method for a special type of quadratic BSDEs. This method is based on a stochastic analogue to the Cole-Hopf transformation from PDE theory. We discuss its applicability to numerically solve indifference pricing problems for contingent claims in an incomplete market. We then proceed to BSDEs whose drifts explicitly incorporate path dependence. Several analytical properties for this type of non-standard BSDEs are derived. Finally, we devote our attention to the problem of a small investor who is equipped with several exercise rights that allow her to collect pre-specified cashflows. We solve this problem by casting it into the language of multiple optimal stopping and develop a martingale dual approach for characterizing the optimal possible outcome. Moreover, we develop regression based Monte Carlo algorithms which simulate efficiently lower and upper price bounds.
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Kilgore, Charles Gene, and Catherine Polleys. "An empirical investigation of commercial mortgage-backed securities pricing and the role of the rating agencies." Thesis, Massachusetts Institute of Technology, 1996. http://hdl.handle.net/1721.1/59507.
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Thesis (S.M.)--Massachusetts Institute of Technology, Dept. of Urban Studies and Planning, September 1996 [first author]; and, (S.M.)--Massachusetts Institute of Technology, Dept. of Urban Studies and Planning, February 1997 [second author].Includes bibliographical references (leaves 69-70).
by Charles Gene Kilgore and Catherine Polleys.
S.M.
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Ellch, Michael L. (Michael Joseph). "Examining issuance and pricing of Commercial Mortgage Backed Securities during the financial crisis of 2007-2009." Thesis, Massachusetts Institute of Technology, 2011. http://hdl.handle.net/1721.1/68192.
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Thesis (S.M. in Real Estate Development)--Massachusetts Institute of Technology, Program in Real Estate Development in Conjunction with the Center for Real Estate, 2011.This electronic version was submitted by the student author. The certified thesis is available in the Institute Archives and Special Collections.
Cataloged from student-submitted PDF version of thesis.
Includes bibliographical references (p. 60-63).
Changes in the issuance of Commercial Mortgage Backed Securities are examined and contrasted with market events and policy action during the financial crisis of 2007-2009. Additionally, a sample of investment-grade Commercial Mortgage Backed Securities are separated by original rating and observed in a time series chart against the market events and policy actions from June 2007 through May 2010.
by Michael J. Ellch.
S.M.in Real Estate Development
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Zhang, Jin. "Some innovative numerical approaches for pricing American options." Access electronically, 2007. http://www.library.uow.edu.au/adt-NWU/public/adt-NWU20080915.125545/index.html.
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Yuen, Fei-lung, and 袁飛龍. "Pricing options and equity-indexed annuities in regime-switching models by trinomial tree method." Thesis, The University of Hong Kong (Pokfulam, Hong Kong), 2010. http://hub.hku.hk/bib/B45595616.
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Kateregga, Michael. "Perturbation methods in derivatives pricing under stochastic volatility." Thesis, Stellenbosch : Stellenbosch University, 2012. http://hdl.handle.net/10019.1/71708.
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Thesis (MSc)--Stellenbosch University, 2012.ENGLISH ABSTRACT: This work employs perturbation techniques to price and hedge financial derivatives in a stochastic volatility framework. Fouque et al. [44] model volatility as a function of two processes operating on different time-scales. One process is responsible for the fast-fluctuating feature of volatility and corresponds to the slow time-scale and the second is for slowfluctuations or fast time-scale. The former is an Ergodic Markov process and the latter is a strong solution to a Lipschitz stochastic differential equation. This work mainly involves modelling, analysis and estimation techniques, exploiting the concept of mean reversion of volatility. The approach used is robust in the sense that it does not assume a specific volatility model. Using singular and regular perturbation techniques on the resulting PDE a first-order price correction to Black-Scholes option pricing model is derived. Vital groupings of market parameters are identified and their estimation from market data is extremely efficient and stable. The implied volatility is expressed as a linear (affine) function of log-moneyness-tomaturity ratio, and can be easily calibrated by estimating the grouped market parameters from the observed implied volatility surface. Importantly, the same grouped parameters can be used to price other complex derivatives beyond the European and American options, which include Barrier, Asian, Basket and Forward options. However, this semi-analytic perturbative approach is effective for longer maturities and unstable when pricing is done close to maturity. As a result a more accurate technique, the decomposition pricing approach that gives explicit analytic first- and second-order pricing and implied volatility formulae is discussed as one of the current alternatives. Here, the method is only employed for European options but an extension to other options could be an idea for further research. The only requirements for this method are integrability and regularity of the stochastic volatility process. Corrections to [3] remarkable work are discussed here.
AFRIKAANSE OPSOMMING: Hierdie werk gebruik steuringstegnieke om finansiële afgeleide instrumente in ’n stogastiese wisselvalligheid raamwerk te prys en te verskans. Fouque et al. [44] gemodelleer wisselvalligheid as ’n funksie van twee prosesse wat op verskillende tyd-skale werk. Een proses is verantwoordelik vir die vinnig-wisselende eienskap van die wisselvalligheid en stem ooreen met die stadiger tyd-skaal en die tweede is vir stadig-wisselende fluktuasies of ’n vinniger tyd-skaal. Die voormalige is ’n Ergodiese-Markov-proses en die laasgenoemde is ’n sterk oplossing vir ’n Lipschitz stogastiese differensiaalvergelyking. Hierdie werk behels hoofsaaklik modellering, analise en skattingstegnieke, wat die konsep van terugkeer to die gemiddelde van die wisseling gebruik. Die benadering wat gebruik word is rubuust in die sin dat dit nie ’n aanname van ’n spesifieke wisselvalligheid model maak nie. Deur singulêre en reëlmatige steuringstegnieke te gebruik op die PDV kan ’n eerste-orde pryskorreksie aan die Black-Scholes opsie-waardasiemodel afgelei word. Belangrike groeperings van mark parameters is geïdentifiseer en hul geskatte waardes van mark data is uiters doeltreffend en stabiel. Die geïmpliseerde onbestendigheid word uitgedruk as ’n lineêre (affiene) funksie van die log-geldkarakter-tot-verval verhouding, en kan maklik gekalibreer word deur gegroepeerde mark parameters te beraam van die waargenome geïmpliseerde wisselvalligheids vlak. Wat belangrik is, is dat dieselfde gegroepeerde parameters gebruik kan word om ander komplekse afgeleide instrumente buite die Europese en Amerikaanse opsies te prys, dié sluit in Barrier, Asiatiese, Basket en Stuur opsies. Hierdie semi-analitiese steurings benadering is effektief vir langer termyne en onstabiel wanneer pryse naby aan die vervaldatum beraam word. As gevolg hiervan is ’n meer akkurate tegniek, die ontbinding prys benadering wat eksplisiete analitiese eerste- en tweede-orde pryse en geïmpliseerde wisselvalligheid formules gee as een van die huidige alternatiewe bespreek. Hier word slegs die metode vir Europese opsies gebruik, maar ’n uitbreiding na ander opsies kan’n idee vir verdere navorsing wees. Die enigste vereistes vir hierdie metode is integreerbaarheid en reëlmatigheid van die stogastiese wisselvalligheid proses. Korreksies tot [3] se noemenswaardige werk word ook hier bespreek.
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Chen, Hongqing. "An Empirical Study on the Jump-diffusion Two-beta Asset Pricing Model." PDXScholar, 1996. https://pdxscholar.library.pdx.edu/open_access_etds/1325.
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This dissertation focuses on testing and exploring the usage of the jump-diffusion two-beta asset pricing model. Daily and monthly security returns from both NYSE and AMEX are employed to form various samples for the empirical study. The maximum likelihood estimation is employed to estimate parameters of the jump-diffusion processes. A thorough study on the existence of jump-diffusion processes is carried out with the likelihood ratio test. The probability of existence of the jump process is introduced as an indicator of "switching" between the diffusion process and the jump process. This new empirical method marks a contribution to future studies on the jump-diffusion process. It also makes the jump-diffusion two-beta asset pricing model operational for financial analyses. Hypothesis tests focus on the specifications of the new model as well as the distinction between it and the conventional capital asset pricing model. Both parametric and non-parametric tests are carried out in this study. Comparing with previous models on the risk-return relationship, such as the capital asset pricing model, the arbitrage pricing theory and various multi-factor models, the jump-diffusion two-beta asset pricing model is simple and intuitive. It possesses more explanatory power when the jump process is dominant. This characteristic makes it a better model in explaining the January effect. Extra effort is put in the study of the January Effect due to the importance of the phenomenon. Empirical findings from this study agree with the model in that the systematic risk of an asset is the weighted average of both jump and diffusion betas. It is also found that the systematic risk of the conventional CAPM does not equal the weighted average of jump and diffusion betas.
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Binkowski, Karol Patryk. "Pricing of European options using empirical characteristic functions." Phd thesis, Australia : Macquarie University, 2008. http://hdl.handle.net/1959.14/28623.
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Thesis (PhD)--Macquarie University, Division of Economic and Financial Studies, Dept. of Statistics, 2008.Bibliography: p. 73-77.
Introduction -- Lévy processes used in option pricing -- Option pricing for Lévy processes -- Option pricing based on empirical characteristic functions -- Performance of the five models on historical data -- Conclusions -- References -- Appendix A. Proofs -- Appendix B. Supplements -- Appendix C. Matlab programs.
Pricing problems of financial derivatives are among the most important ones in Quantitative Finance. Since 1973 when a Nobel prize winning model was introduced by Black, Merton and Scholes the Brownian Motion (BM) process gained huge attention of professionals professionals. It is now known, however, that stock market log-returns do not follow the very popular BM process. Derivative pricing models which are based on more general Lévy processes tend to perform better. --Carr & Madan (1999) and Lewis (2001) (CML) developed a method for vanilla options valuation based on a characteristic function of asset log-returns assuming that they follow a Lévy process. Assuming that at least part of the problem is in adequate modeling of the distribution of log-returns of the underlying price process, we use instead a nonparametric approach in the CML formula and replaced the unknown characteristic function with its empirical version, the Empirical Characteristic Functions (ECF). We consider four modifications of this model based on the ECF. The first modification requires only historical log-returns of the underlying price process. The other three modifications of the model need, in addition, a calibration based on historical option prices. We compare their performance based on the historical data of the DAX index and on ODAX options written on the index between the 1st of June 2006 and the 17th of May 2007. The resulting pricing errors show that one of our models performs, at least in the cases considered in the project, better than the Carr & Madan (1999) model based on calibration of a parametric Lévy model, called a VG model. --Our study seems to confirm a necessity of using implied parameters, apart from an adequate modeling of the probability distribution of the asset log-returns. It indicates that to precisely reproduce behaviour of the real option prices yet other factors like stochastic volatility need to be included in the option pricing model. Fortunately the discrepancies between our model and real option prices are reduced by introducing the implied parameters which seem to be easily modeled and forecasted using a mixture of regression and time series models. Such approach is computationaly less expensive than the explicit modeling of the stochastic volatility like in the Heston (1993) model and its modifications.
Mode of access: World Wide Web.
x, 111 p. ill., charts
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Mutengwa, Tafadzwa Isaac. "An analysis of the Libor and Swap market models for pricing interest-rate derivatives." Thesis, Rhodes University, 2012. http://hdl.handle.net/10962/d1005535.
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This thesis focuses on the non-arbitrage (fair) pricing of interest rate derivatives, in particular caplets and swaptions using the LIBOR market model (LMM) developed by Brace, Gatarek, and Musiela (1997) and Swap market model (SMM) developed Jamshidan (1997), respectively. Today, in most financial markets, interest rate derivatives are priced using the renowned Black-Scholes formula developed by Black and Scholes (1973). We present new pricing models for caplets and swaptions, which can be implemented in the financial market other than the Black-Scholes model. We theoretically construct these "new market models" and then test their practical aspects. We show that the dynamics of the LMM imply a pricing formula for caplets that has the same structure as the Black-Scholes pricing formula for a caplet that is used by market practitioners. For the SMM we also theoretically construct an arbitrage-free interest rate model that implies a pricing formula for swaptions that has the same structure as the Black-Scholes pricing formula for swaptions. We empirically compare the pricing performance of the LMM against the Black-Scholes for pricing caplets using Monte Carlo methods.
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Harmon, Jacob. "Effects of inflation and interest rates on land pricing." Thesis, Kansas State University, 2011. http://hdl.handle.net/2097/9256.
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Master of AgribusinessDepartment of Agricultural Economics
Allen M. Featherstone
Land is typically the highest value category of assets that farmers and ranchers have on their balance sheets. The value of land is affected by inflation. Understanding the effect of inflation on the land market helps farmers make better land pricing decisions and better asset management decisions. Using Treasury Bills and Farm Credit Bonds, future inflation expectations and agricultural risk premiums can be estimated. With the recent government stimulation of the economy and the resulting large amount of money infused into the economy, inflation is becoming an increasing concern with investors. Economic theory suggests that this infusion of money will affect future interest rates and ultimately the value of land given the inverse relationship between interest rates and the value of land. These lingering affects occur with the rise and fall of yield rates for Treasury Bills and Farm Credit bonds. Farm Credit bonds are sold at a premium over Treasury Bills. This premium indicates the market-assessed additional risk that farmers have to pay for their operating loans and other mortgages. Even though land values are affected by inflation, other things affect land values such as recreational use, development, and natural resource exploration. A combination of inflation and these other affects can greatly affect land prices.
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Arikan, Ali F. "Structural models for the pricing of corporate securities and financial synergies. Applications with stochastic processes including arithmetic Brownian motion." Thesis, University of Bradford, 2010. http://hdl.handle.net/10454/5416.
Full textAbstract:
Mergers are the combining of two or more firms to create synergies. These synergies
may come from various sources such as operational synergies come from
economies of scale or financial synergies come from increased value of securities
of the firm. There are vast amount of studies analysing operational synergies of
mergers. This study analyses the financial ones. This way the dynamics of purely
financial synergies can be revealed. Purely financial synergies can be transformed
into financial instruments such as securitization.
While analysing financial synergies the puzzle of distribution of financial synergies
between claimholders is investigated. Previous literature on mergers showed that
bondholders may gain more than existing shareholders of the merging firms. This
may become rather controversial. A merger may be synergistic but it does not
necessarily mean that shareholders¿ wealth will increase. Managers and/or shareholders
are the parties making the merger decision. If managers are acting to the
best interest of shareholders then they would try to increase shareholders¿ wealth.
To solve this problem first the dynamics of mergers were analysed and then new
strategies developed and demonstrated to transfer the financial synergies to the
shareholders.
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Daswa, Khumbudzo Ashley. "Perfomance evaluation of the tracking ability and pricing efficiency of Exchange Traded Funds (ETFS) in South Africa." University of the Western cape, 2016. http://hdl.handle.net/11394/5562.
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Magister Commercii - MComSince the listing of the Satrix 40 in November 2000, Exchange Traded Fund (ETFs) have grown to become an investment vehicle of choice amongst retail and institutional investors of the Johannesburg Securities Exchange (JSE). Albeit gaining such an enormous traction, investors' remains curious about ETFs ability to successfully replicate the movements of their target benchmark indices and also their capability to yield arbitrage profit opportunity through mispricing. In addition to that, investors are also interested to know whether ETFs as an index tracking investment vehicle are resilient in variously cycles of the economy. Motivated by this gap in the body of knowledge, this research undertakes to evaluate the tracking ability and pricing efficiency of 19 ETFs listed on the JSE over various cycles of the economy. According to Faulkner, Loewald and Makrelov (2013) South African economy experienced the effect of the 2008 global financial crisis between 1 September 2008 and 30 June 2009. For that reason, the examination period of this research is segmented into four main categories namely: full examination period which spans from the launch date of each of the ETF under review until 30 September 2015, pre-crisis period that is between the launch date and 29August 2008, crisis-period dated 1 September 2008 and 30 June 2009 and the post-crisis or the recovery phase being 1 July 2009 through 30 September 2015. The tracking ability results across all the sub-periods suggested that, on average, ETFs yields daily returns which closely resemble that of their target benchmark indices but with relatively high level of volatility. With regard to the tracking error as another tracking ability measurement, it was discovered that the ETFs under review were inadequately replicating the movements of their target benchmark indices irrespective of the economic cycle. In tandem with the evidence documented by Mateus and Rahmani (2014) from the London Stock Exchange (LSE), tracking errors were substantially high during the 2008 global financial crisis as opposed to the prior and the post crisis period. Across all the examination periods, sizeable amount of tracking error was found to be associated to the ETFs which mimics the international broad-market access underlying indices. Amongst other things, the diversity of these indices as well as the trading hours overlap between the JSE and their host market were found to be the key attributing factors. On the contrary, ETFs which replicates most liquid target benchmark indices such as the FTSE/JSE Top 40 index appeared to have lower tracking error on relative basis. In this regard, the liquidity of the FTSE/JSE Top 40 index proved to be the main attribute. Apart from the diversity or the liquidity of indices, the length of the examination period also had a significant influence towards the magnitude of tracking errors. In this instance, shorter examination period were found to be characterised by noise or volatility in the market which makes it difficult for the ETFs providers to promptly rebalance their portfolios and align them to their target benchmark indices. Over and above these factors, this research discovered that tracking errors across all the sub-periods were largely driven by management fees and daily volatility of the ETFs market prices, more especially during the crisis period. On the one hand, trading volume and the effect of dividends distribution had a negative influence towards the magnitude of tracking errors. On the question of how efficient these 19 ETFs are, the empirical findings revealed that significant deviation between the ETFs closing price and the Net Asset Value (NAV) does exist either being a discount or premium. In line with the prior work on the JSE by Charteris (2013), ETFs which mimics local based indices were found to be trading mostly on a discount to the NAV whilst the opposite was true in the case of the international broad-market access ETFs. At the same token, international broad-market access ETFs portrayed sizeable amount of premiums across all the cycles of the economy. In line with the analysis of tracking errors, such enormous premiums were mainly driven by lack of synchronicity in the trading hours between the JSE and host market wherein these ETFs target benchmark indices are listed. Empirical literature suggests that ETFs that exhibit discount and premium which fails to persist for more than one trading day are deemed to be efficiently priced since there is limited opportunity to arbitrage. On that note, this research found that mispricing of ETFs which mimics most liquid indices such as the domestic broad-market access and sectorial indices disappears within a period of one trading day. For that reason, majority of these ETFs were considered to be efficiently priced against their NAV. Contrarily, discounts and premiums exhibited by ETFs which mostly replicate style based and the international broad-market access indices appeared to be persistent even to the fifth trading day. From the attribution point of view, the complexity of these ETFs underlying indices as well as the trading hours overlap between the JSE and the host market of these indices were found to be the main drivers of such level of mispricing. In addition to that, attribution analysis through linear regression proved that transaction cost (bid-ask spread), daily volatility of the ETFs market prices as well as the impact of trading volume had a positive influence towards the existence of discounts and premiums observed across all sub-periods.
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Arikan, Ali Ferda. "Structural models for the pricing of corporate securities and financial synergies : applications with stochastic processes including arithmetic Brownian motion." Thesis, University of Bradford, 2010. http://hdl.handle.net/10454/5416.
Full textAbstract:
Mergers are the combining of two or more firms to create synergies. These synergies may come from various sources such as operational synergies come from economies of scale or financial synergies come from increased value of securities of the firm. There are vast amount of studies analysing operational synergies of mergers. This study analyses the financial ones. This way the dynamics of purely financial synergies can be revealed. Purely financial synergies can be transformed into financial instruments such as securitization. While analysing financial synergies the puzzle of distribution of financial synergies between claimholders is investigated. Previous literature on mergers showed that bondholders may gain more than existing shareholders of the merging firms. This may become rather controversial. A merger may be synergistic but it does not necessarily mean that shareholders' wealth will increase. Managers and/or shareholders are the parties making the merger decision. If managers are acting to the best interest of shareholders then they would try to increase shareholders' wealth. To solve this problem first the dynamics of mergers were analysed and then new strategies developed and demonstrated to transfer the financial synergies to the shareholders.
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Zhou, Rui. "Economic Pricing of Mortality-Linked Securities." Thesis, 2012. http://hdl.handle.net/10012/7031.
Full textAbstract:
In previous research on pricing mortality-linked securities, the no-arbitrage approach is often used. However, this method, which takes market prices as given, is difficult to implement in today's embryonic market where there are few traded securities. In particular, with limited market price data, identifying a risk neutral measure requires strong assumptions. In this thesis, we approach the pricing problem from a different angle by considering economic methods. We propose pricing approaches in both competitive market and non-competitive market.
In the competitive market, we treat the pricing work as a Walrasian tâtonnement process, in which prices are determined through a gradual calibration of supply and demand. Such a pricing framework provides with us a pair of supply and demand curves. From these curves we can tell if there will be any trade between the counterparties, and if there will, at what price the mortality-linked security will be traded. This method does not require the market prices of other mortality-linked securities as input. This can spare us from the problems associated with the lack of market price data.
We extend the pricing framework to incorporate population basis risk, which arises when a pension plan relies on standardized instruments to hedge its longevity risk exposure. This extension allows us to obtain the price and trading quantity of mortality-linked securities in the presence of population basis risk. The resulting supply and demand curves help us understand how population basis risk would affect the behaviors of agents. We apply the method to a hypothetical longevity bond, using real mortality data from different populations. Our illustrations show that, interestingly, population basis risk can affect the price of a mortality-linked security in different directions, depending on the properties of the populations involved.
We have also examined the impact of transitory mortality jumps on trading in a competitive market. Mortality dynamics are subject to jumps, which are due to events such as the Spanish flu in 1918. Such jumps can have a significant impact on prices of mortality-linked securities, and therefore should be taken into account in modeling. Although several single-population mortality models with jump effects have been developed, they are not adequate for trades in which population basis risk exists. We first develop a two-population mortality model with transitory jump effects, and then we use the proposed mortality model to examine how mortality jumps may affect the supply and demand of mortality-linked securities.
Finally, we model the pricing process in a non-competitive market as a bargaining game. Nash's bargaining solution is applied to obtain a unique trading contract. With no requirement of a competitive market, this approach is more appropriate for the current mortality-linked security market. We compare this approach with the other proposed pricing method. It is found that both pricing methods lead to Pareto optimal outcomes.
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Lee, An-Hsun, and 李安珣. "The pricing of mortgage backed securities." Thesis, 2005. http://ndltd.ncl.edu.tw/handle/64596655160972202017.
Full textAbstract:
碩士東吳大學
國際貿易學系
93
The securitization of mortgage backed and its related derivatives are important in fixed income market. Cause their liquidity and revenue are better than other fixed income tools, and default rate is lower. Many banks and rating company are wanted to develop this issue. However, the risk analysis and pricing are very difficult. We try to build cash flow and analysis mortgage backed securities.
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Hsu, Chia-Cheng, and 徐嘉呈. "The Pricing of Mortgage-Backed Securities." Thesis, 2004. http://ndltd.ncl.edu.tw/handle/96328008491747552995.
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碩士國立中央大學
財務金融研究所
92
In this thesis, we use both prepayment option and default option to describe prepayment behavior to find the optimal time for each mortgage holder to prepay his or her mortgage loan. Furthermore, we estimate the prepayment rate at each month. In addition, we separate the role of the short term interest rate as the discount factor from that of the mortgage interest rate as an incentive factor associated with prepayment. The characteristic of each mortgage holder in the pool is all different. Therefore, in our model, we also consider heterogeneity of each mortgage holder in the pool and assume that heterogeneity is the fraction of the remaining principal balance. In addition, through simulations, we find that our model can capture various exogenous factors which influence the price, weighted-average life and duration of MBS. Finally, we develop a way to redistribute cash flows into different tranches.
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Ping-Lin, Yu. "Pricing Mortgage Pass-through Securities by Simulation." 2004. http://www.cetd.com.tw/ec/thesisdetail.aspx?etdun=U0001-0507200416073000.
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