The traditional Black-Scholes (BS) model relies heavily on the assumption that underlying returns are normally distributed. In reality however there is a large amount of evidence to suggest that this assumption is weak and that actual return distributions are non-Gaussian. This dissertation looks at algorithmically generating a Volatility Targeting Strategy (VTS) which can be used as an underlying asset. The rationale here is that since the VTS has a constant prespecified level of volatility, its returns should be normally distributed, thus tending closer to an underlying that adheres to the assumptions of BS.
Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:uct/oai:localhost:11427/31319 |
Date | 25 February 2020 |
Creators | Vakaloudis, Dmitri |
Contributors | Mahomed, Obeid |
Publisher | Faculty of Commerce, African Institute of Financial Markets and Risk Management |
Source Sets | South African National ETD Portal |
Language | English |
Detected Language | English |
Type | Master Thesis, Masters, MPhil |
Format | application/pdf |
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