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Implementing a filtered term structure model in the South African bond market
Includes bibliographical references (leaves 72-75).
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| Other Authors: | |
| Format: | Thesis |
| Language: | English |
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Department of Statistical Sciences
2014
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| _version_ | 1867613965006143488 |
|---|---|
| access_status_str | Open Access |
| author | Ririe, Angela |
| author2 | Dugmore, Brett |
| author_browse | Dugmore, Brett Ririe, Angela |
| author_facet | Dugmore, Brett Ririe, Angela |
| author_sort | Ririe, Angela |
| collection | Thesis |
| description | Includes bibliographical references (leaves 72-75). |
| format | Thesis |
| id | oai:open.uct.ac.za:11427/4357 |
| institution | University of Cape Town (South Africa) |
| language | eng |
| last_indexed | 2026-06-10T12:44:31.388Z |
| license_str | Not specified — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from UCTD — University of Cape Town Open Access Repository |
| publishDate | 2014 |
| publishDateRange | 2014 |
| publishDateSort | 2014 |
| publisher | Department of Statistical Sciences |
| publisherStr | Department of Statistical Sciences |
| record_format | dspace |
| source_str | UCTD — University of Cape Town Open Access Repository |
| spelling | oai:open.uct.ac.za:11427/4357 Implementing a filtered term structure model in the South African bond market Ririe, Angela Dugmore, Brett Statistical Science Includes bibliographical references (leaves 72-75). A key feature of the local bond market is that trade is concentrated in a few liquid government bonds. We review and implement the filtered term structure model proposed by Gombani, Jaschke and Runggaldier that defines an arbitrage free pricing system that is consistent with liquid bond prices. The model is derived in two stages called the underlying and perturbed models. The underlying model defines the theoretical arbitrage free term structure. It is assumed to be a multi-factor, affine HNM type model where the stochastic factors satisfy a linear diffusion equation. Gombani et al. argue that the differences between the theoretical and market prices should be interpreted as unobserved errors. The perturbed model the prices of the observed bonds as their theoretical values distorted by noise. Assuming that the information at any point in time is the market prices of a finite number of liquidly traded bonds, the perturbed model is used to derive a continually updated pricing system that is arbitrage free with respect to the observed prices. The method is based on the Kalman filter. We implement a particular three-factor version of the model and calibrate it to the South African market. We discuss the relevant data and numerical and statistical techniques including principal component analysis and yield curve construction. We apply the formulas for pricing European options on zero-coupon and coupon bearing bonds for Gaussian HJM models to the perturbed model and present two examples to demonstrate the application of the model to bond and option pricing. 2014-07-30T17:43:24Z 2014-07-30T17:43:24Z 2007 Master Thesis Masters MSc http://hdl.handle.net/11427/4357 eng application/pdf Department of Statistical Sciences Faculty of Science University of Cape Town |
| spellingShingle | Statistical Science Ririe, Angela Implementing a filtered term structure model in the South African bond market |
| thesis_degree_str | Master's |
| title | Implementing a filtered term structure model in the South African bond market |
| title_full | Implementing a filtered term structure model in the South African bond market |
| title_fullStr | Implementing a filtered term structure model in the South African bond market |
| title_full_unstemmed | Implementing a filtered term structure model in the South African bond market |
| title_short | Implementing a filtered term structure model in the South African bond market |
| title_sort | implementing a filtered term structure model in the south african bond market |
| topic | Statistical Science |
| url | http://hdl.handle.net/11427/4357 |
| work_keys_str_mv | AT ririeangela implementingafilteredtermstructuremodelinthesouthafricanbondmarket |