Quantifying Model Risk in Option Pricing and Value-at-Risk Models

Financial practitioners use models in order to price, hedge and measure risk. These models are reliant on assumptions and are prone to ”model risk”. Increased innovation in complex financial products has lead to increased risk exposure and has spurred research into understanding model risk and its underlying factors. This dissertation quantifies model risk inherent in Value-at-Risk (VaR) on a variety of portfolios comprised of European options written on the ALSI futures index across various maturities. The European options under consideration will be modelled using the Black-Scholes, Heston and Variance-Gamma models.

Grantor

African Institute of Financial Markets and Risk Management

Year dc:date.issued

2019

Author dc:creator

• Ngwenza, Dumisani

Advisors dc:contributor.advisor

• Mahomed, Obeid
• Ouwehand, Peter

• Mathematical Finance

Handle dc:identifier.uri

http://hdl.handle.net/11427/31059

OAI identifier oai:identifier

oai:open.uct.ac.za:11427/31059