Stochastic elasticity of vol-of-vol and pricing of variance swaps
Author
Abstract
Suggested Citation
DOI: 10.1016/j.matcom.2020.03.011
Download full text from publisher
As the access to this document is restricted, you may want to search for a different version of it.
References listed on IDEAS
- Fouque,Jean-Pierre & Papanicolaou,George & Sircar,Ronnie & Sølna,Knut, 2011. "Multiscale Stochastic Volatility for Equity, Interest Rate, and Credit Derivatives," Cambridge Books, Cambridge University Press, number 9780521843584, November.
- Carole Bernard & Zhenyu Cui, 2014. "Prices and Asymptotics for Discrete Variance Swaps," Applied Mathematical Finance, Taylor & Francis Journals, vol. 21(2), pages 140-173, April.
- Andrey Itkin, 2013.
"New solvable stochastic volatility models for pricing volatility derivatives,"
Review of Derivatives Research, Springer, vol. 16(2), pages 111-134, July.
- Andrey Itkin, 2012. "New solvable stochastic volatility models for pricing volatility derivatives," Papers 1205.3550, arXiv.org, revised Jun 2012.
- Sun‐Yong Choi & Jeong‐Hoon Kim & Ji‐Hun Yoon, 2016. "The Heston model with stochastic elasticity of variance," Applied Stochastic Models in Business and Industry, John Wiley & Sons, vol. 32(6), pages 804-824, November.
- Yang Liu & Mariano Croce & Ivan Shaliastovich & Ric Colacito, 2016.
"Volatility Risk Pass-Through,"
2016 Meeting Papers
135, Society for Economic Dynamics.
- Croce, Mariano & Colacito, Ric & Liu, Yang & Shaliastovich, Ivan, 2018. "Volatility Risk Pass-Through," CEPR Discussion Papers 13325, C.E.P.R. Discussion Papers.
- Riccardo Colacito & Mariano Max Croce & Yang Liu & Ivan Shaliastovich, 2018. "Volatility Risk Pass-through," NBER Working Papers 25276, National Bureau of Economic Research, Inc.
- Mark Broadie & Ashish Jain, 2008. "The Effect Of Jumps And Discrete Sampling On Volatility And Variance Swaps," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 11(08), pages 761-797.
- Jean-Pierre Fouque & Matthew Lorig & Ronnie Sircar, 2016. "Second order multiscale stochastic volatility asymptotics: stochastic terminal layer analysis and calibration," Finance and Stochastics, Springer, vol. 20(3), pages 543-588, July.
- Gabriel G. Drimus, 2012. "Options on realized variance by transform methods: a non-affine stochastic volatility model," Quantitative Finance, Taylor & Francis Journals, vol. 12(11), pages 1679-1694, November.
- Huang, Darien & Schlag, Christian & Shaliastovich, Ivan & Thimme, Julian, 2018. "Volatility-of-volatility risk," SAFE Working Paper Series 210, Leibniz Institute for Financial Research SAFE.
- Kim, See-Woo & Kim, Jeong-Hoon, 2018. "Analytic solutions for variance swaps with double-mean-reverting volatility," Chaos, Solitons & Fractals, Elsevier, vol. 114(C), pages 130-144.
- Heston, Steven L, 1993. "A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options," The Review of Financial Studies, Society for Financial Studies, vol. 6(2), pages 327-343.
- Wendong Zheng & Yue Kuen Kwok, 2014. "Saddlepoint Approximation Methods for Pricing Derivatives on Discrete Realized Variance," Applied Mathematical Finance, Taylor & Francis Journals, vol. 21(1), pages 1-31, March.
- Grzelak, Lech & Oosterlee, Kees, 2009. "On The Heston Model with Stochastic Interest Rates," MPRA Paper 20620, University Library of Munich, Germany, revised 18 Jan 2010.
- Branger, Nicole & Rodrigues, Paulo & Schlag, Christian, 2018. "Level and slope of volatility smiles in long-run risk models," Journal of Economic Dynamics and Control, Elsevier, vol. 86(C), pages 95-122.
- Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
- Kim, Jeong-Hoon & Yoon, Ji-Hun & Lee, Jungwoo & Choi, Sun-Yong, 2015. "On the stochastic elasticity of variance diffusions," Economic Modelling, Elsevier, vol. 51(C), pages 263-268.
Most related items
These are the items that most often cite the same works as this one and are cited by the same works as this one.- Min-Ku Lee & See-Woo Kim & Jeong-Hoon Kim, 2022. "Variance Swaps Under Multiscale Stochastic Volatility of Volatility," Methodology and Computing in Applied Probability, Springer, vol. 24(1), pages 39-64, March.
- Young Shin Kim & Kum-Hwan Roh & Raphael Douady, 2022.
"Tempered stable processes with time-varying exponential tails,"
Quantitative Finance, Taylor & Francis Journals, vol. 22(3), pages 541-561, March.
- Young Shin Kim & Kum-Hwan Roh & Raphael Douady, 2020. "Tempered Stable Processes with Time Varying Exponential Tails," Papers 2006.07669, arXiv.org, revised Aug 2020.
- Raphaël Douady & Young Shin Kim & Kum-Hwan Roh, 2021. "Tempered stable processes with time-varying exponential tails," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-03512709, HAL.
- Young Shin Aaron Kim & Kum-Hwan Roh & Raphaël Douady, 2020. "Tempered Stable Processes with Time Varying Exponential Tails," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-03018495, HAL.
- Raphaël Douady & Young Shin Kim & Kum-Hwan Roh, 2021. "Tempered stable processes with time-varying exponential tails," Post-Print hal-03512709, HAL.
- Young Shin Aaron Kim & Kum-Hwan Roh & Raphaël Douady, 2020. "Tempered Stable Processes with Time Varying Exponential Tails," Working Papers hal-03018495, HAL.
- Chi Hung Yuen & Wendong Zheng & Yue Kuen Kwok, 2015. "Pricing Exotic Discrete Variance Swaps under the 3/2-Stochastic Volatility Models," Applied Mathematical Finance, Taylor & Francis Journals, vol. 22(5), pages 421-449, November.
- Sun-Yong Choi & Sotheara Veng & Jeong-Hoon Kim & Ji-Hun Yoon, 2022. "A Mellin Transform Approach to the Pricing of Options with Default Risk," Computational Economics, Springer;Society for Computational Economics, vol. 59(3), pages 1113-1134, March.
- Kim, See-Woo & Kim, Jeong-Hoon, 2019. "Variance swaps with double exponential Ornstein-Uhlenbeck stochastic volatility," The North American Journal of Economics and Finance, Elsevier, vol. 48(C), pages 149-169.
- Cao, Jiling & Kim, Jeong-Hoon & Liu, Wenqiang & Zhang, Wenjun, 2023. "Rescaling the double-mean-reverting 4/2 stochastic volatility model for derivative pricing," Finance Research Letters, Elsevier, vol. 58(PB).
- Cao, Jiling & Kim, Jeong-Hoon & Li, Xi & Zhang, Wenjun, 2023. "Valuation of barrier and lookback options under hybrid CEV and stochastic volatility," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 208(C), pages 660-676.
- Seo, Jun-Ho & Kim, Jeong-Hoon, 2022. "Multiscale stochastic elasticity of variance for options and equity linked annuity; A Mellin transform approach," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 192(C), pages 303-320.
- Ruan, Xinfeng, 2020. "Volatility-of-volatility and the cross-section of option returns," Journal of Financial Markets, Elsevier, vol. 48(C).
- Lian, Guanghua & Chiarella, Carl & Kalev, Petko S., 2014. "Volatility swaps and volatility options on discretely sampled realized variance," Journal of Economic Dynamics and Control, Elsevier, vol. 47(C), pages 239-262.
- Youngin Yoon & Jeong-Hoon Kim, 2023. "A Closed Form Solution for Pricing Variance Swaps Under the Rescaled Double Heston Model," Computational Economics, Springer;Society for Computational Economics, vol. 61(1), pages 429-450, January.
- Min-Ku Lee, 2019. "Pricing Perpetual American Lookback Options Under Stochastic Volatility," Computational Economics, Springer;Society for Computational Economics, vol. 53(3), pages 1265-1277, March.
- Giacomo Toscano & Maria Cristina Recchioni, 2020. "Bias optimal vol-of-vol estimation: the role of window overlapping," Papers 2004.04013, arXiv.org, revised Jul 2021.
- Zhang, Sumei & Gao, Xiong, 2019. "An asymptotic expansion method for geometric Asian options pricing under the double Heston model," Chaos, Solitons & Fractals, Elsevier, vol. 127(C), pages 1-9.
- Roman Horsky & Tilman Sayer, 2015. "Joining The Heston And A Three-Factor Short Rate Model: A Closed-Form Approach," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 18(08), pages 1-17, December.
- Maria Cristina Recchioni & Yu Sun & Gabriele Tedeschi, 2017.
"Can negative interest rates really affect option pricing? Empirical evidence from an explicitly solvable stochastic volatility model,"
Quantitative Finance, Taylor & Francis Journals, vol. 17(8), pages 1257-1275, August.
- Maria Cristina Recchioni & Yu Sun & Gabriele Tedeschi, 2016. "Can negative interest rates really affect option pricing? Empirical evidence from an explicitly solvable stochastic volatility model," Working Papers 2016/23, Economics Department, Universitat Jaume I, Castellón (Spain).
- Andrea Barletta & Elisa Nicolato & Stefano Pagliarani, 2019. "The short‐time behavior of VIX‐implied volatilities in a multifactor stochastic volatility framework," Mathematical Finance, Wiley Blackwell, vol. 29(3), pages 928-966, July.
- Ah-Reum Han & Jeong-Hoon Kim & See-Woo Kim, 2021. "Variance Swaps with Deterministic and Stochastic Correlations," Computational Economics, Springer;Society for Computational Economics, vol. 57(4), pages 1059-1092, April.
- Jeon, Jaegi & Kim, Geonwoo & Huh, Jeonggyu, 2021. "An asymptotic expansion approach to the valuation of vulnerable options under a multiscale stochastic volatility model," Chaos, Solitons & Fractals, Elsevier, vol. 144(C).
- Yijuan Liang & Xiuchuan Xu, 2019. "Variance and Dimension Reduction Monte Carlo Method for Pricing European Multi-Asset Options with Stochastic Volatilities," Sustainability, MDPI, vol. 11(3), pages 1-21, February.
More about this item
Keywords
Variance swap; Volatility of volatility; Stochastic elasticity variance; Heston model;All these keywords.
Statistics
Access and download statisticsCorrections
All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:matcom:v:177:y:2020:i:c:p:420-440. See general information about how to correct material in RePEc.
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/mathematics-and-computers-in-simulation/ .
Please note that corrections may take a couple of weeks to filter through the various RePEc services.