Model uncertainty in financial markets is prevalent by the very nature of how models are constructed and used by financial practitioners. As such, a proper characterization of model uncertainty should be paramount in the eyes of every practitioner, and furthermore, a proper framework for implementing such a characterization towards financial activities should be implicit. While model uncertainty is acknowledged by practitioners, a cohesive and robust framework for determining a model uncertainty risk measure that is broadly accepted by practitioners is missing. We acknowledge this deficiency and provide a practitioner's guide for evaluating a modern characterization of model uncertainty, specifically that of Li and Kwon, as applied to a subset of derivative related calculations, with the goal of promoting its implementation by practitioners. We promote its implementation by demonstrating the utility and flexibility of such a characterization relative to another modern model uncertainty risk measure, specifically that of Cont.
| Identifer | oai:union.ndltd.org:TORONTO/oai:tspace.library.utoronto.ca:1807/35640 |
| Date | 15 July 2013 |
| Creators | Lukovich, Jovan |
| Contributors | Kwon, Roy H. |
| Source Sets | University of Toronto |
| Language | en_ca |
| Detected Language | English |
| Type | Thesis |
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