Analytic solutions of variance swaps for Heston models with stochastic long-run mean of variance and jumps. [PDF]
PLoS ONEThis paper presents the pricing formulas for variance swaps within the Heston model that incorporates jumps and a stochastic long-term mean for the underlying asset. By leveraging the Feynman-Kac theorem, we derive a partial integro-differential equation
Jing Fu
doaj +5 more sources
A Closed Form Solution for Pricing Variance Swaps Under the Rescaled Double Heston Model. [PDF]
Comput Econ, 2023 As is well known, multi-factor stochastic volatility models are necessary to capture the market accurately in pricing financial derivatives. However, the multi-factor models usually require too many parameters to be calibrated efficiently and they do not
Yoon Y, Kim JH.
europepmc +4 more sources
Closed-form pricing formulas for variance swaps in the Heston model with stochastic long-run mean of variance [PDF]
Computational and Applied Mathematics, 2022 The Heston model is a popular stochastic volatility model in mathematical finance and it has been extended or modified in several ways by researchers to overcome the shortcomings of the model in the context of pricing derivatives.
Yoon Y, Seo J, Kim J.
europepmc +4 more sources
Exact Pricing and Hedging Formulas of Long Dated Variance Swaps under a $3/2$ Volatility Model [PDF]
Journal of Computational and Applied Mathematics (2015), pp.
181-196, 2010 This paper investigates the pricing and hedging of variance swaps under a $3/2$ volatility model. Explicit pricing and hedging formulas of variance swaps are obtained under the benchmark approach, which only requires the existence of the num\'{e}raire portfolio.
Leunglung Chan, Eckhard Platen
arxiv +4 more sources
Pricing Variance Swaps under MRG Model with Regime-Switching: Discrete Observations Case [PDF]
Mathematics, 2023 In this paper, we creatively price the discretely sampled variance swaps under the mean-reverting Gaussian model (MRG model in short) with regime-switching asymmetric double exponential jump diffusion.
Anqi Zou, Jiajie Wang, Chiye Wu
doaj +3 more sources
Pricing of Averaged Variance, Volatility, Covariance and Correlation Swaps with Semi-Markov Volatilities [PDF]
Risks, 2023 In this paper, we consider the problem of pricing variance, volatility, covariance and correlation swaps for financial markets with semi-Markov volatilities.
Anatoliy Swishchuk, Sebastian Franco
doaj +3 more sources
AIMS MathematicsThe CIR stochastic volatility model is modified to introduce nonlinear mean reversion, with the long-run volatility average as a random variable controlled by two parts being modeled through a Brownian motion and a Markov chain, respectively.
Xin-Jiang He, Sha Lin
doaj +3 more sources
Mathematics, 2021 At present, the study concerning pricing variance swaps under CIR the (Cox–Ingersoll–Ross)–Heston hybrid model has achieved many results; however, due to the instantaneous interest rate and instantaneous volatility in the model following the Feller ...
Chen Mao, Guanqi Liu, Yuwen Wang
doaj +2 more sources
Discretely sampled variance and volatility swaps versus their continuous approximations [PDF]
arXiv, 2011 Discretely sampled variance and volatility swaps trade actively in OTC markets. To price these swaps, the continuously sampled approximation is often used to simplify the computations. The purpose of this paper is to study the conditions under which this approximation is valid.
Robert A. Jarrow +3 more
arxiv +3 more sources
Variance and Volatility Swaps and Futures Pricing for Stochastic Volatility Models [PDF]
arXiv, 2017 In this chapter, we consider volatility swap, variance swap and VIX future pricing under different stochastic volatility models and jump diffusion models which are commonly used in financial market. We use convexity correction approximation technique and Laplace transform method to evaluate volatility strikes and estimate VIX future prices.
Anatoliy Swishchuk, Zijia Wang
arxiv +4 more sources