On the pricing of forward-start variance swaps with stochastic volatility and stochastic interest rate
Variance swaps have gained an immense recognition in the financial market based on the tremendous spike in its trading volume since late 1990s. Being categorized under volatility derivatives, the substance of variance swaps can be related to the vital role of volatility in making investment decision...
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| Format: | Article |
| Language: | English |
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Pushpa Publishing House
2017
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| Online Access: | https://repo.uum.edu.my/id/eprint/26234/1/FJMS%20102%2012%202017%203223%203240.pdf |
| _version_ | 1803629087284002816 |
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| author | Roslan, Teh Raihana Nazirah |
| author_facet | Roslan, Teh Raihana Nazirah |
| author_sort | Roslan, Teh Raihana Nazirah |
| collection | UUM |
| description | Variance swaps have gained an immense recognition in the financial market based on the tremendous spike in its trading volume since late 1990s. Being categorized under volatility derivatives, the substance of variance swaps can be related to the vital role of volatility in making investment decisions. In this paper, the price of discretely-sampled forward-start variance swaps is evaluated using an equity-interest rate hybrid model. The modeling framework involves an extension of the
Heston stochastic volatility model, which is combined with the dynamics of the Cox-Ingersoll-Ross (CIR) stochastic interest rate model. Focus is given on the forward-start nature, identified by the starting time of the sampling period being a future date. Previous studies on variance swaps were mainly focusing on instantaneous-start
variance swaps, whereas in reality, most of traded variance swaps |
| first_indexed | 2024-07-04T06:32:16Z |
| format | Article |
| id | uum-26234 |
| institution | Universiti Utara Malaysia |
| language | English |
| last_indexed | 2024-07-04T06:32:16Z |
| publishDate | 2017 |
| publisher | Pushpa Publishing House |
| record_format | dspace |
| spelling | uum-262342019-07-17T06:52:32Z https://repo.uum.edu.my/id/eprint/26234/ On the pricing of forward-start variance swaps with stochastic volatility and stochastic interest rate Roslan, Teh Raihana Nazirah QA75 Electronic computers. Computer science Variance swaps have gained an immense recognition in the financial market based on the tremendous spike in its trading volume since late 1990s. Being categorized under volatility derivatives, the substance of variance swaps can be related to the vital role of volatility in making investment decisions. In this paper, the price of discretely-sampled forward-start variance swaps is evaluated using an equity-interest rate hybrid model. The modeling framework involves an extension of the Heston stochastic volatility model, which is combined with the dynamics of the Cox-Ingersoll-Ross (CIR) stochastic interest rate model. Focus is given on the forward-start nature, identified by the starting time of the sampling period being a future date. Previous studies on variance swaps were mainly focusing on instantaneous-start variance swaps, whereas in reality, most of traded variance swaps Pushpa Publishing House 2017 Article PeerReviewed application/pdf en https://repo.uum.edu.my/id/eprint/26234/1/FJMS%20102%2012%202017%203223%203240.pdf Roslan, Teh Raihana Nazirah (2017) On the pricing of forward-start variance swaps with stochastic volatility and stochastic interest rate. Far East Journal of Mathematical Sciences (FJMS), 102 (12). pp. 3223-3240. ISSN 09720871 http://doi.org/10.17654/MS102123223 doi:10.17654/MS102123223 doi:10.17654/MS102123223 |
| spellingShingle | QA75 Electronic computers. Computer science Roslan, Teh Raihana Nazirah On the pricing of forward-start variance swaps with stochastic volatility and stochastic interest rate |
| title | On the pricing of forward-start variance swaps with stochastic volatility and stochastic interest rate |
| title_full | On the pricing of forward-start variance swaps with stochastic volatility and stochastic interest rate |
| title_fullStr | On the pricing of forward-start variance swaps with stochastic volatility and stochastic interest rate |
| title_full_unstemmed | On the pricing of forward-start variance swaps with stochastic volatility and stochastic interest rate |
| title_short | On the pricing of forward-start variance swaps with stochastic volatility and stochastic interest rate |
| title_sort | on the pricing of forward start variance swaps with stochastic volatility and stochastic interest rate |
| topic | QA75 Electronic computers. Computer science |
| url | https://repo.uum.edu.my/id/eprint/26234/1/FJMS%20102%2012%202017%203223%203240.pdf |
| work_keys_str_mv | AT roslantehraihananazirah onthepricingofforwardstartvarianceswapswithstochasticvolatilityandstochasticinterestrate |