Estimating Long Term Equity Implied Volatility

Estimating and extrapolating long term equity implied volatilities is of importance in the investment and insurance industry, where ’long term’ refers to periods of ten to thirty years. Market-consistent calibration is difficult to perform in the South African market due to lack of long term liquid tradable derivatives. In this case, practitioners have to estimate the implied volatility surface across a range of expiries and moneyness levels. A detailed evaluation is performed for different estimation techniques to assess the strengths and weaknesses of each of the models. The estimation techniques considered include statistical and time-series techniques, non-parametric techniques and three potential methods which use the local volatility model.

Grantor

African Institute of Financial Markets and Risk Management

Year dc:date.issued

2019

Author dc:creator

• Crawford, Danielle Ana

Advisor dc:contributor.advisor

• Mahomed, Obeid

• risk management

Handle dc:identifier.uri

http://hdl.handle.net/11427/31366

OAI identifier oai:identifier

oai:open.uct.ac.za:11427/31366