Analytical formulae for variance and volatility swaps with stochastic volatility, stochastic equilibrium level and regime switching

Autor:	Xin-Jiang He, Sha Lin
Jazyk:	angličtina
Rok vydání:	2024
Předmět:	nonlinear mean reversion regime switching stochastic volatility analytical variance and volatility swaps Mathematics QA1-939
Zdroj:	AIMS Mathematics, Vol 9, Iss 8, Pp 22225-22238 (2024)
Druh dokumentu:	article
ISSN:	2473-6988 44630824
DOI:	10.3934/math.20241081?viewType=HTML
Popis:	The CIR stochastic volatility model is modified to introduce nonlinear mean reversion, with the long-run volatility average as a random variable controlled by two parts being modeled through a Brownian motion and a Markov chain, respectively. This model still possesses an analytical formulation of the forward characteristic function, from which we establish variance swap prices as well as volatility swap ones with a nonlinear payoff in closed form. The numerical implementation of the two formulae demonstrates the significant impact of regime switching.
Databáze:	Directory of Open Access Journals
Externí odkaz:	https://doaj.org/article/c4cb729213e4463082470662b52730c7 Zobrazit plný text záznamu View record in DOAJ