A CLOSED-FORM EXACT SOLUTION FOR PRICING VARIANCE SWAPS WITH STOCHASTIC VOLATILITY

DOI10.1111/j.1467-9965.2010.00436.xzbMath1214.91115OpenAlexW3123121933MaRDI QIDQ3084598

Guang-Hua Lian, Song-Ping Zhu

Publication date: 25 March 2011

Published in: Mathematical Finance (Search for Journal in Brave)

Full work available at URL: http://hdl.handle.net/10292/1689

zbMATH Keywords

stochastic volatilityexplicit formulavariance swapsHeston modelclosed-form exact solution

Mathematics Subject Classification ID

Financial applications of other theories (91G80) Derivative securities (option pricing, hedging, etc.) (91G20) PDEs in connection with game theory, economics, social and behavioral sciences (35Q91)

Related Items (52)

A closed-form formula for pricing variance swaps on commodities ⋮ PRICING VARIANCE SWAPS UNDER DOUBLE HESTON STOCHASTIC VOLATILITY MODEL WITH STOCHASTIC INTEREST RATE ⋮ Catastrophe equity put options with target variance ⋮ Continuous time mean–variance–utility portfolio problem and its equilibrium strategy ⋮ Variance swap with mean reversion, multifactor stochastic volatility and jumps ⋮ Pricing variance and volatility swaps with stochastic volatility, stochastic interest rate and regime switching ⋮ Pricing VIX options with stochastic volatility and random jumps ⋮ Closed-form pricing formulas for variance swaps in the Heston model with stochastic long-run mean of variance ⋮ Variance swap pricing under Markov-modulated jump-diffusion model ⋮ Variance-optimal hedging for target volatility options ⋮ Pricing variance swaps under subordinated Jacobi stochastic volatility models ⋮ Variance swaps under multiscale stochastic volatility of volatility ⋮ Prices and Asymptotics for Discrete Variance Swaps ⋮ Saddlepoint Approximation Methods for Pricing Derivatives on Discrete Realized Variance ⋮ Pricing forward-start variance swaps with stochastic volatility ⋮ APPROXIMATE PRICING OF DERIVATIVES UNDER FRACTIONAL STOCHASTIC VOLATILITY MODEL ⋮ A series-form solution for pricing variance and volatility swaps with stochastic volatility and stochastic interest rate ⋮ Valuation of European crude oil options with co-jump diffusions and stochastic interest rate ⋮ AN ANALYTICAL APPROACH FOR VARIANCE SWAPS WITH AN ORNSTEIN–UHLENBECK PROCESS ⋮ Variance swaps under the threshold Ornstein–Uhlenbeck model ⋮ VARIANCE AND VOLATILITY SWAPS UNDER A TWO-FACTOR STOCHASTIC VOLATILITY MODEL WITH REGIME SWITCHING ⋮ EQUILIBRIUM PRICE OF VARIANCE SWAPS UNDER STOCHASTIC VOLATILITY WITH LÉVY JUMPS AND STOCHASTIC INTEREST RATE ⋮ Pricing variance swaps under hybrid CEV and stochastic volatility ⋮ A path-independent approach to integrated variance under the CEV model ⋮ Unnamed Item ⋮ MULTIVARIATE DISTRIBUTIONS FOR FINANCIAL RETURNS ⋮ Pricing variance swaps in a hybrid model of stochastic volatility and interest rate with regime-switching ⋮ Pricing variance swaps under stochastic volatility and stochastic interest rate ⋮ A superconvergent partial differential equation approach to price variance swaps under regime switching models ⋮ Volatility swaps and volatility options on discretely sampled realized variance ⋮ A general framework for discretely sampled realized variance derivatives in stochastic volatility models with jumps ⋮ On the valuation of variance swaps with stochastic volatility ⋮ Pricing generalized variance swaps under the Heston model with stochastic interest rates ⋮ Stochastic elasticity of vol-of-vol and pricing of variance swaps ⋮ Analytic solutions for variance swaps with double-mean-reverting volatility ⋮ Model-independent hedging strategies for variance swaps ⋮ Pricing variance swaps for stochastic volatilities with delay and jumps ⋮ Volatility swaps valuation under stochastic volatility with jumps and stochastic intensity ⋮ Solution of the fractional Black-Scholes option pricing model by finite difference method ⋮ A simplified analytical approach for pricing discretely-sampled variance swaps with stochastic volatility ⋮ Pricing of volatility derivatives in a Heston-CIR model with Markov-modulated jump diffusion ⋮ Analytically pricing volatility swaps and volatility options with discrete sampling: nonlinear payoff volatility derivatives ⋮ A closed-form expansion approach for pricing discretely monitored variance swaps ⋮ RECURSIVE ALGORITHMS FOR PRICING DISCRETE VARIANCE OPTIONS AND VOLATILITY SWAPS UNDER TIME-CHANGED LÉVY PROCESSES ⋮ Analytic solution for ratchet guaranteed minimum death benefit options under a variety of mortality laws ⋮ Closed-form variance swap prices under general affine GARCH models and their continuous-time limits ⋮ Variance and volatility swaps valuations with the stochastic liquidity risk ⋮ Variance swaps valuation under non-affine GARCH models and their diffusion limits ⋮ A closed-form pricing formula for variance swaps under MRG-Vasicek model ⋮ Analytically pricing volatility swaps under stochastic volatility ⋮ On the Convexity Correction Approximation in Pricing Volatility Swaps and VIX Futures ⋮ Pricing variance swaps under stochastic volatility with an Ornstein-Uhlenbeck process

Cites Work

• Unnamed Item
• Unnamed Item
• The Pricing of Options and Corporate Liabilities
• Pricing Stock Options in a Jump-Diffusion Model with Stochastic Volatility and Interest Rates: Applications of Fourier Inversion Methods
• A Theory of the Term Structure of Interest Rates
• The Statistical Mechanics of Financial Markets
• Exact Simulation of Stochastic Volatility and Other Affine Jump Diffusion Processes
• Pricing Volatility Swaps Under Heston's Stochastic Volatility Model with Regime Switching
• THE EFFECT OF JUMPS AND DISCRETE SAMPLING ON VOLATILITY AND VARIANCE SWAPS
• Equilibrium Models With Singular Asset Prices
• On the pricing and hedging of volatility derivatives
• Stochastic Volatility With an Ornstein–Uhlenbeck Process: An Extension
• A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options
• Stock Price Distributions with Stochastic Volatility: An Analytic Approach
• An intertemporal asset pricing model with stochastic consumption and investment opportunities
• Stochastic volatility and the goodness-of-fit of the Heston model

This page was built for publication: A CLOSED-FORM EXACT SOLUTION FOR PRICING VARIANCE SWAPS WITH STOCHASTIC VOLATILITY