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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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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, Yoshiki Obayashi
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Stochastic Analysis and Applications, 2020
In this paper, we consider volatility swap and variance swap when the underlying asset is described by a process with multiple stochastic volatility models.
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In this paper, we consider volatility swap and variance swap when the underlying asset is described by a process with multiple stochastic volatility models.
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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
A.S.M. Sohel Azad +3 more
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Quadratic hedging strategies for volatility swaps
Finance Research Letters, 2015Abstract This paper investigates a variance-optimal hedging strategy for volatility swaps under exponential Levy dynamics. To obtain the optimal initial capital and the optimal amount of the underlying asset, we derive the explicit expressions of the Follmer–Schweizer decomposition, which in turn implies the explicit expressions of hedging strategies.
Xingchun Wang +3 more
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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.
Young Ho Eom +2 more
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Volatility swaps and volatility options on discretely sampled realized variance
Journal of Economic Dynamics and Control, 2014zbMATH Open Web Interface contents unavailable due to conflicting licenses.
Lian, Guanghua +2 more
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A Guide to Volatility and Variance Swaps
The Journal of Derivatives, 1999Trading in derivatives has caused investors, and especially market makers, to be concerned with the volatility of asset returns along with their direction. Uncertain and time-varying volatility imparts risk to an otherwise hedged position, and volatility risk is not easy to manage with ordinary instruments.
Kresimir Demeterfi +3 more
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Simulation of Stochastic Volatility Variance Swap
2018This paper aims to propose efficient mathematical model of variance swap to study the effect of stochastic volatility in different time-scales on the option pricing. Two types of stochastic volatility, including Ornstein-Uhlenbeck (OU) process and Cox-Ingersoll-Ross (CIR) process are considered. Analytical solution of CIR model is presented. For the OU
Shican Liu +3 more
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AN IMPLIED VOLATILITY MODEL DETERMINED BY CREDIT DEFAULT SWAPS [PDF]
International Journal of Theoretical and Applied Finance, 2012 In this paper we propose a diffusion model relating the stock price dynamics to the CDS spread dynamics of a company by assuming a linear relationship between instantaneous stock volatility and CDS spread. To value contingent claims under this model we apply a finite elements discretization to the associated pricing partial differential equation.
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