Sac 520:Project in actuarial science.Equity insurance in Kenya

Abstract

Share prices are extremely volatile and therefore despite the chances of very high returns, there are chances of huge losses in the event the price of the asset under discussion goes down. In the European, Asian and American markets, options and futures have been used for stock insurance. In Kenya, this new market is yet to be formed and therefore despite the growth of the Nairobi Stock Exchange, especially through the day to day Initial Public Offer (IPO), investors are not covered. This project targets the bridging of this disparity in the market. It ventures in to a field yet to be explored in Kenya, namely Options and Futures as a hedging strategy in the stock market. In this project, we will try and price the Put Options of some selected stocks in Kenya. For the sake of this project, we will assume the existence of an options market. called the Nairobi Options Stock Market.