{"id":{"repo_id":"cape-town","oai_identifier":"oai:open.uct.ac.za:11427/20532"},"canonical_url":"https://search.dev.ndltd.org/etd/cape-town/oai:open.uct.ac.za:11427/20532","repository":{"repo_id":"cape-town","name":"University of Cape Town","base_url":"https://open.uct.ac.za/oai/request"},"display":{"title":"The cost of using misspecified models to exercise and hedge American options on coupon bearing bonds","abstract":"This dissertation investigates the cost of using single-factor models to exercise and hedge American options on South African coupon bearing bonds, when the simulated market term structure is driven by a two-factor model. Even if the single factor models are re-calibrated on a daily basis to the term structure, we find that the exercise and hedge strategies can be suboptimal and incur large losses. There is a vast body of research suggesting that real market term structures are in actual fact driven by multiple factors, so suboptimal losses can be largely reduced by simply employing a well-specified multi-factor model.","abstract_html":"This dissertation investigates the cost of using single-factor models to exercise and hedge American options on South African coupon bearing bonds, when the simulated market term structure is driven by a two-factor model. Even if the single factor models are re-calibrated on a daily basis to the term structure, we find that the exercise and hedge strategies can be suboptimal and incur large losses. There is a vast body of research suggesting that real market term structures are in actual fact driven by multiple factors, so suboptimal losses can be largely reduced by simply employing a well-specified multi-factor model.","abstract_has_math":false,"creators":["Welihockyj, Alexander"],"institution":"Division of Actuarial Science","degree_name":null,"degree_level":null,"degree_discipline":null,"degree_department":null,"school":null,"contributors":[],"advisors":["Silverman, Searle","McWalter, Thomas"],"committee_chairs":[],"committee_members":[],"year":2016,"date_issued":"2016","date_published":"2016","updated_at":"2026-07-22T22:23:17Z","subjects":[],"languages":["eng"],"rights":[],"rights_urls":[],"identifier_entries":[]},"links":{"outbound_url":"http://hdl.handle.net/11427/20532","outbound_label":"Handle","outbound_source":"dc:identifier.uri"},"metadata_groups":[{"id":"people","label":"People","entries":[{"key":"dc:contributor.advisor","label":"Advisor","values":["Silverman, Searle","McWalter, Thomas"]},{"key":"dc:creator","label":"Author","values":["Welihockyj, Alexander"]}]},{"id":"academic_context","label":"Academic Context","entries":[{"key":"dc:date.accessioned","label":"Dc Date Accessioned","values":["2016-07-20T12:29:40Z"]},{"key":"dc:date.available","label":"Dc Date Available","values":["2016-07-20T12:29:40Z"]},{"key":"dc:date.issued","label":"Date","values":["2016"]},{"key":"dc:publisher.department","label":"Dc Publisher Department","values":["Division of Actuarial Science"]},{"key":"dc:publisher.institution","label":"Dc Publisher Institution","values":["University of Cape Town"]},{"key":"dc:type","label":"Dc Type","values":["Master Thesis"]},{"key":"dc:type.qualificationlevel","label":"Dc Type Qualificationlevel","values":["Masters"]},{"key":"dc:type.qualificationname","label":"Dc Type Qualificationname","values":["MPhil"]}]},{"id":"language_rights","label":"Language and Rights","entries":[{"key":"dc:language.iso","label":"Language (ISO)","values":["eng"]}]},{"id":"identifiers","label":"Identifiers","entries":[{"key":"dc:identifier.uri","label":"Identifier URI","values":["http://hdl.handle.net/11427/20532"]}]},{"id":"additional","label":"Additional Metadata","entries":[{"key":"dc:description.abstract","label":"Abstract","values":["This dissertation investigates the cost of using single-factor models to exercise and hedge American options on South African coupon bearing bonds, when the simulated market term structure is driven by a two-factor model. Even if the single factor models are re-calibrated on a daily basis to the term structure, we find that the exercise and hedge strategies can be suboptimal and incur large losses. There is a vast body of research suggesting that real market term structures are in actual fact driven by multiple factors, so suboptimal losses can be largely reduced by simply employing a well-specified multi-factor model."]},{"key":"dc:title","label":"Title","values":["The cost of using misspecified models to exercise and hedge American options on coupon bearing bonds"]}]}],"canonical_facts":{"dc:contributor.advisor":["Silverman, Searle","McWalter, Thomas"],"dc:creator":["Welihockyj, Alexander"],"dc:date.accessioned":["2016-07-20T12:29:40Z"],"dc:date.available":["2016-07-20T12:29:40Z"],"dc:date.issued":["2016"],"dc:description.abstract":["This dissertation investigates the cost of using single-factor models to exercise and hedge American options on South African coupon bearing bonds, when the simulated market term structure is driven by a two-factor model. Even if the single factor models are re-calibrated on a daily basis to the term structure, we find that the exercise and hedge strategies can be suboptimal and incur large losses. There is a vast body of research suggesting that real market term structures are in actual fact driven by multiple factors, so suboptimal losses can be largely reduced by simply employing a well-specified multi-factor model."],"dc:identifier.uri":["http://hdl.handle.net/11427/20532"],"dc:language.iso":["eng"],"dc:publisher.department":["Division of Actuarial Science"],"dc:publisher.institution":["University of Cape Town"],"dc:title":["The cost of using misspecified models to exercise and hedge American options on coupon bearing bonds"],"dc:type":["Master Thesis"],"dc:type.qualificationlevel":["Masters"],"dc:type.qualificationname":["MPhil"]},"updated_at":"2026-07-22T22:23:17Z"}