Modeling and Pricing of Variance and Volatility Swaps for Local Semi-Markov Volatilities in Financial Engineering
نویسندگان
چکیده
منابع مشابه
Modeling and Pricing of Variance and Volatility Swaps for Local Semi-Markov Volatilities in Financial Engineering
We consider a semi-Markov modulated security market consisting of a riskless asset or bond with constant interest rate and risky asset or stock, whose dynamics follow gemoetric Brownian motion with volatility that depends on semi-Markov process. Two cases for semi-Markov volatilities are studied: local current and local semi-Markov volatilities. Using the martingale characterization of semi-Mar...
متن کاملModeling of Variance and Volatility Swaps for Financial Markets with Stochastic Volatilities
A new probabilistic approach is proposed to study variance and volatility swaps for financial markets with underlying asset and variance that follow the Heston (1993) model. We also study covariance and correlation swaps for the financial markets. As an application, we provide a numerical example using S&P60 Canada Index to price swap on the volatility.
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We study the valuation of the variance swaps under stochastic volatility with delay and jumps. In our model, the volatility of the underlying stock price process not only incorporates jumps, which are found to be active empirically, but also exhibits past dependence: the behavior of a stock price right after a given time t depends not only on the situation at t but also on the whole past histor...
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Following the pricing approach proposed by Zhu & Lian [19], we present an exact solution for pricing variance swaps with the realized variance in the payoff function being a logarithmic return of the underlying asset at some pre-specified discrete sampling points. Our newly-found pricing formula is based on the Heston’s [8] two-factor stochastic volatility model. The discovery of this exact and...
متن کاملPricing variance swaps under stochastic volatility and stochastic interest rate
In this thesis, we study the issue of pricing discretely-sampled variance swaps under stochastic volatility and stochastic interest rate. In particular, our modeling framework consists of the equity which follows the dynamics of the Heston stochastic volatility model, whereas the stochastic interest rate is driven by the Cox-Ingersoll-Ross (CIR) model. We first extend the framework of [119] by ...
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ژورنال
عنوان ژورنال: Mathematical Problems in Engineering
سال: 2010
ISSN: 1024-123X,1563-5147
DOI: 10.1155/2010/537571