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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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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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Volatility and variance swaps and options in the fractional SABR model
European Journal of Finance, 2020Appropriate capturing the nature of financial market volatility is a significant factor for the pricing of volatility derivatives. A recent study by Gatheral, Jaisson and Rosenbaum [2018.
See-Woo Kim, Jeong‐Hoon Kim
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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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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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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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