Asymptotic and exact pricing of options on variance
نویسندگان
چکیده
منابع مشابه
Pricing options on realized variance
Models which hypothesize that returns are pure jump processes with independent increments have been shown to be capable of capturing the observed variation of market prices of vanilla stock options across strike and maturity. In this paper, these models are employed to derive in closed form the prices of derivatives written on future realized quadratic variation. Alternative work on pricing der...
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We derive efficient and accurate analytic approximation formulas for pricing options on discrete realized variance (DRV) under affine stochastic volatility models with jumps using the partially exact and bounded (PEB) approximations. The PEB method is an enhanced extension of the conditioning variable approach commonly used in deriving analytic approximation formulas for pricing discrete Asian ...
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This paper examines a volatility estimation bias that may be commonly exhibited by all option pricing models on all underlying sources of risk. Black-Scholes (1972) were the first to illustrate the bias by showing that their model under priced options on relatively low variance stocks and over priced options on relatively high variance stocks. The bias is always observed in cross section among ...
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Based on the dual formulation by Rogers (2002), Monte Carlo algorithms to estimate the high-biased and low-biased estimates for American option prices are proposed. Bounds for pricing errors and the variance of biased estimators are shown to be dependent on hedging martingales. These martingales are applied to (1) simultaneously reduce the error bound and the variance of the high-biased estimat...
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We consider the pricing of options written on the quadratic variation of a given stock price process. Using the Laplace transform approach, we determine semi-explicit formulas in general affine models allowing for jumps, stochastic volatility and the leverage effect. Moreover, we show that the joint dynamics of the underlying stock and a corresponding variance swap again are of affine form. Fin...
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ژورنال
عنوان ژورنال: Finance and Stochastics
سال: 2012
ISSN: 0949-2984,1432-1122
DOI: 10.1007/s00780-012-0178-z