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- Title
Valuations of Variance and Volatility Swaps Under Double Heston Jump-Diffusion Model With Approximative Fractional Stochastic Volatility.
- Authors
Wang, Ke; Guo, Xunxiang
- Abstract
In this paper, we study the variance and volatility swaps pricing problem under the framework of double Heston jump diffusion model with approximative fractional stochastic volatility. The pricing formulas of discretely-sampled variance and volatility swaps are obtained by deriving the characteristic function and solving the governing partial integro-differential equations(PIDEs). We also obtain the limits of discretely-sampled variance and volatility swaps pricing formulas, which are the pricing formulas of continuously-sampled variance and volatility swaps. Finally, the effectiveness of the pricing formula is illustrated by comparing with some existing works, and the influence of approximation factor and Hurst parameter variation on the prices of swaps are studied.
- Subjects
PRICES; INTEGRO-differential equations; JUMP processes; CHARACTERISTIC functions; VALUATION; INTEREST rate swaps
- Publication
Computational Economics, 2024, Vol 63, Issue 4, p1543
- ISSN
0927-7099
- Publication type
Article
- DOI
10.1007/s10614-023-10374-7