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Modelling The Financial Market Using Copula

Gyamfi, Michael
http://rave.ohiolink.edu/etdc/view?acc_num=akron149601408369316

Abstract Details

2017, Master of Science, University of Akron, Applied Mathematics.
This project is to track the differences and the movements between the Actual and theoretical future prices using Copula. Standard & Poor's 500 Index (SPX) and 10-year treasury bond yield rate was downloaded from Yahoo! website and SPX future prices were downloaded from Moore Research Centre website and their observations from January 2, 2001 to May 27, 2016 were used for this analysis. Log-returns of the future prices were taken to model and analyse the direct movements of the future prices. The distributions of the marginals and the best family of copula was selected and simulated. We compared the copula method to the classical method after 2000 simulation. A high level of mis-pricing in the future price which corresponds to the period 2008-2009 was observed. This observed mis-pricing could be as a result of relative over-reaction of the Financial market compared to future market. Inverse relationship between the performance of SPX and the volatility of future prices was observed. Standardised Student's t-distribution was concluded to be the marginal distribution using the maximum likelihood method to estimate their distribution parameters. Student t-Copula was concluded to be the best family of copula to measure the dependence. In further studies, modelling the risk associated with futures stock price and pricing with copula based simulation will be a major red flag to be addressed.
Nao Mimoto, Dr (Advisor)
Patrick Wilber, Dr (Other)
Kevin Kreider, Dr (Other)
43 p.
Applied Mathematics
Copula, Theoretical Future Price and Actual Future Price

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Citations

  • Gyamfi, M. (2017). Modelling The Financial Market Using Copula [Master's thesis, University of Akron]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=akron149601408369316

    APA Style (7th edition)

  • Gyamfi, Michael. Modelling The Financial Market Using Copula. 2017. University of Akron, Master's thesis. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=akron149601408369316.

    MLA Style (8th edition)

  • Gyamfi, Michael. "Modelling The Financial Market Using Copula." Master's thesis, University of Akron, 2017. http://rave.ohiolink.edu/etdc/view?acc_num=akron149601408369316

    Chicago Manual of Style (17th edition)

akron149601408369316
285
© 2017, all rights reserved.
This open access ETD is published by University of Akron and OhioLINK.