A simplified analytical approach for pricing discretely-sampled variance swaps with stochastic volatility

作者：Rujivan Sanae; Zhu Song Ping^*

来源：Applied Mathematics Letters, 2012, 25(11): 1644-1650.

DOI：10.1016/j.aml.2012.01.029

• Variance swaps
• Heston model
• Closed-form exact solution
• Explicit formula
• Stochastic volatility

Pricing variance swaps under stochastic volatility with discretely-sampled realized variance has been a hot subject pursued recently; quite a few papers have already been published (Zhu and Lian (2009, 2011, [11,4]): Swishchuk and Li (2011)[5]). In this paper, we present a simplified approach to price discretely-sampled variance swaps. Compared with the approach presented by Zhu and Lian (2011) [4], an important feature of our approach is that there is no need for the introduction of a new state variable and the utilization of the generalized Fourier transform. This has significantly simplified the solution procedure and will thus enable researchers to view this type of problems from a different angle.

• 出版日期2012-11