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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.
Date27 February 2020
CreatorsCrawford, Danielle Ana
ContributorsMahomed, Obeid
PublisherFaculty of Commerce, African Institute of Financial Markets and Risk Management
Source SetsSouth African National ETD Portal
Detected LanguageEnglish
TypeMasters Thesis, Masters, MPhil

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