Volatility swaps valuation under stochastic volatility with jumps and stochastic intensity

DOI10.1016/J.AMC.2019.02.063MaRDI QIDQ2009351zbMATH OpenOpenAlexWikidataFDO

Authors Ben-Zhang Yang, Jia Yue, Minghui Wang, Nan-Jing Huang

Publication date 28 November 2019

Published in Applied Mathematics and Computation (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1805.06226

zbMATH Keywords

pricingstochastic intensitystochastic volatility model with jumpsvolatility derivatives

Mathematics Subject Classification ID

Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Derivative securities (option pricing, hedging, etc.) (91G20) Numerical methods (including Monte Carlo methods) (91G60) Financial applications of other theories (91G80)

Abstract: In this paper, a pricing formula for volatility swaps is delivered when the underlying asset follows the stochastic volatility model with jumps and stochastic intensity. By using Feynman-Kac theorem, a partial integral differential equation is obtained to derive the joint moment generating function of the previous model. Moreover, discrete and continuous sampled volatility swap pricing formulas are given by employing transform techniques and the relationship between two pricing formulas is discussed. Finally, some numerical simulations are reported to support the results presented in this paper.

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Cited in

(15)

• Analytically pricing volatility swaps and volatility options with discrete sampling: nonlinear payoff volatility derivatives
• Variance and volatility swaps valuations with the stochastic liquidity risk
• Equilibrium price and optimal insider trading strategy under stochastic liquidity with long memory
• Valuation of European crude oil options with co-jump diffusions and stochastic interest rate
• Pricing variance swaps with stochastic volatility under jump-diffusion
• Pricing of variance and volatility swaps with semi-Markov volatilities
• Retracted article: A generalized real option pricing method of R\&D investments: jump diffusion and external competition
• Pricing variance swaps for stochastic volatilities with delay and jumps
• VOLATILITY SWAPS VALUATION UNDER A MODIFIED RISK-NEUTRALIZED HESTON MODEL WITH A STOCHASTIC LONG-RUN VARIANCE LEVEL
• Robust replication of volatility and hybrid derivatives on jump diffusions
• Analytically pricing European options with a two-factor Stein-Stein model
• Convergence analysis of an IMEX scheme for an integro-differential equation with inexact boundary arising in option pricing with stochastic intensity jumps
• Pricing discrete barrier options under the jump-diffusion model with stochastic volatility and stochastic intensity
• Analytically pricing volatility options and capped/floored volatility swaps with nonlinear payoffs in discrete observation case under the Merton jump-diffusion model driven by a nonhomogeneous Poisson process
• Pricing one-cliquet option under jump diffusion model with stochastic volatility and stochastic intensity

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