Callibration of implied volatilities for illiquid interest rate products in the Brazilian market

The project airns to address issues in the pricing of Interest rate derivatives in an illiquid market In particular, the project will examine the pricing of options on the Brazilian average interbank deposit rate Index. Acritical element in deterrnining appropriate prices is the volatility implied by observable market prices. However, the lack of liquidity in these markets makes that problematic. The project will examine different rnethodologies for producing implied volatilities for use in a pricing model. For each methodology, the project will examine the reliability, efficacy, and potential risk and errors in doing so. A pricing rnethodology will have to be implemented and employed as part of the project work ..

Faculty Supervisor:

David Lozinski

Student:

Partner:

RiskGrid Technologies Inc

Discipline:

Mathematics

Sector:

Information and cultural industries; Professional, scientific and technical services

University:

McMaster University

Program: