Modeling and Pricing of Covariance and Correlation Swaps for Financial Markets with Semi-Markov Volatilities

2012/05/24 by Salvi, Giovanni, Swishchuk, Anatoliy V.
#FOS: Economics and business #Pricing of Securities (q-fin.PR)

paper · doi:10.48550/arxiv.1205.5565

Abstract

In this paper, we model financial markets with semi-Markov volatilities and price covarinace and correlation swaps for this markets. Numerical evaluations of vari- nace, volatility, covarinace and correlations swaps with semi-Markov volatility are presented as well. The novelty of the paper lies in pricing of volatility swaps in closed form, and pricing of covariance and correlation swaps in a market with two risky assets.

Related

• Variance and Volatility Swaps and Futures Pricing for Stochastic Volatility Models
• Volatility swaps valuation under stochastic volatility with jumps and\n stochastic intensity
• Pricing variance swaps with stochastic volatility and stochastic interest rate under full correlation structure
• Pricing Exchange Options under Stochastic Correlation
• A Proposal for Multi-asset Generalised Variance Swaps