Pricing and hedging of long dated variance swaps under a 3/2 volatility model

Chan, L; Platen, E

Pricing and hedging of long dated variance swaps under a 3/2 volatility model

Chan, L Platen, E

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Publication Type:: Journal Article
Citation:: Journal of Computational and Applied Mathematics, 2015, 278 pp. 181 - 196
Issue Date:: 2015-04-15

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Field	Value	Language
dc.contributor.author	Chan, L	en_US
dc.contributor.author	Platen, E https://orcid.org/0000-0003-4595-3123	en_US
dc.date.available	2020-05-25T19:03:25Z
dc.date.issued	2015-04-15	en_US
dc.identifier.citation	Journal of Computational and Applied Mathematics, 2015, 278 pp. 181 - 196	en_US
dc.identifier.issn	0377-0427	en_US
dc.identifier.uri	http://hdl.handle.net/10453/36412
dc.description.abstract	© 2014 Elsevier B.V. This paper investigates the pricing and hedging of variance swaps under a 3/2 volatility model using explicit formulae. Pricing and hedging is performed under the benchmark approach, which only requires the existence of the numéraire portfolio. The growth optimal portfolio is used as numéraire together with the real world probability measure as pricing measure. This real world pricing concept provides minimal prices for variance swaps even when an equivalent risk neutral probability measure does not exist.	en_US
dc.relation.ispartof	Journal of Computational and Applied Mathematics	en_US
dc.relation.isbasedon	10.1016/j.cam.2014.09.032	en_US
dc.subject.classification	Numerical & Computational Mathematics	en_US
dc.title	Pricing and hedging of long dated variance swaps under a 3/2 volatility model	en_US
dc.type	Journal Article
utslib.citation.volume	278	en_US
utslib.for	0102 Applied Mathematics	en_US
utslib.for	0103 Numerical and Computational Mathematics	en_US
utslib.for	0906 Electrical and Electronic Engineering	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Science
pubs.organisational-group	/University of Technology Sydney/Faculty of Science/School of Mathematical and Physical Sciences
pubs.organisational-group	/University of Technology Sydney/Strength - QFRC - Quantitative Finance Research Centre
utslib.copyright.status	open_access
pubs.publication-status	Published	en_US
pubs.volume	278	en_US

Abstract:

© 2014 Elsevier B.V. This paper investigates the pricing and hedging of variance swaps under a 3/2 volatility model using explicit formulae. Pricing and hedging is performed under the benchmark approach, which only requires the existence of the numéraire portfolio. The growth optimal portfolio is used as numéraire together with the real world probability measure as pricing measure. This real world pricing concept provides minimal prices for variance swaps even when an equivalent risk neutral probability measure does not exist.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/36412