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Variance Swaps Under Multiscale Stochastic Volatility of Volatility
Methodology and Computing in Applied Probability, 2020Many hedge funds and retail investors demand volatility and variance derivatives in order to manage their exposure to volatility and volatility-of-volatility risk associated with their trading positions. The Heston model is a standard popular stochastic volatility model for pricing volatility and variance derivatives.
Min-Ku Lee, See-Woo Kim, Jeong-Hoon Kim
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The Transmission of Swap Spreads and Volatilities in the International Swap Markets
SSRN Electronic Journal, 2002We investigate the Japanese yen and U.S. dollar interest rate swap markets during the period 1990-2000, by examining the spreads of the swap rates over comparable treasury yields (on Japanese Government Bonds (JGBs) and U.S. Treasury bonds, respectively) for different maturities.
Jun Uno +2 more
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Variance and Volatility Swap Model
2023A variance/volatility swap is an instrument that allows explicit exposure to the realized variance/volatility of an index, stock, etc., without exposure to other risks commonly encountered with derivatives: delta, gamma, etc.
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Transmission of Swap Spreads and Volatilities in the Japanese Swap Market
The Journal of Fixed Income, 2002This is an investigation of the Japanese yen and U.S. dollar interest rate swap markets during 1990–2000. It examines spreads over comparable Treasury yields for different maturities and the transmission of shocks to swap spreads and volatilities from one market to the other.
Marti G. Subrahmanyam +2 more
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Variance and volatility swaps in energy markets
The Journal of Energy Markets, 2010This paper is devoted to the pricing of variance and volatility swaps in energy market. We found explicit variance swap formula and closed form volatility swap formula (using Brockhaus-Long approximation) for energy asset with stochastic volatility that follows continuous-time GARCH (1,1) model (mean-reverting) (or Pilipovi\'{c} one-factor model ...
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Credit Variance Swaps and Volatility Indexes
SSRN Electronic Journal, 2013Credit volatility correlates quite modestly with equity volatility. Currently, only backward-looking indexes for credit volatility exist. We derive model-free indexes of expected CDS index spread volatility that rely on CDS index option prices, which reect the fair value of dedicated credit variance swaps that are forward-looking in nature.
Antonio Mele +3 more
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Discrete variance swap in a rough volatility economy
Journal of Futures Markets, 2021AbstractThe discrete variance swap is one of the most popular volatility derivatives traded on the over‐the‐counter market. This paper discusses its valuation in a rough volatility economy and the impact of roughness on the term structure of discrete variance swap prices. A semianalytic solution is obtained through stochastic convolution. Our numerical
Yiru Xi, Hoi Ying Wong
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Volatility swaps and volatility options on discretely sampled realized variance
Journal of Economic Dynamics and Control, 2013Volatility swaps and variance options are financial products written on discretely sampled realized variance. Actively traded in over-the-counter markets, these products are priced often by a continuously sampled approximation to simplify the computations. This paper presents an analytical approach to efficiently and accurately price discretely sampled
Guanghua Lian +2 more
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Tools for Volatility Engineering, Volatility Swaps, and Volatility Trading
2015This chapter introduces tools for volatility engineering. First, we describe positions with volatility exposure based on options such as delta-hedged calls and straddles. We point out the sensitivity of such positions to variables other than volatility. Then, we move to pure variance products. We describe the replication and pricing of a variance swap.
Robert L. Kosowski, Salih N. Neftci
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International swap market contagion and volatility
Economic Modelling, 2015Abstract Using interest rate swap yield and spread data the linkages and volatility transmission between three major international swap markets: Japan, UK and the US are investigated. The volatilities of the swap yield and spreads are decomposed into long and short term components enabling an assessment to be made of the strength and direction of the
Jonathan A. Batten +3 more
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