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Price Pseudo-Variance, Pseudo-Covariance, Pseudo-Volatility, and Pseudo-Correlation Swaps - In Analytical Closed-Forms

By Raymond K. Cheng, Stéphan Lawi and Anatoliy Swishchuck

Abstract

In the usual complete market framework, the unique prices of swaps involving so-called pseudo-statistics can be computed as the mathematical expectation of the discounted payoffs under the measure in which the discounted rate process is a martingale. In this report, we present analytic formulas for these expectations for the pseudo-variance and pseudo-volatility swaps, as requested by the problem statement. Also, we use Monte-Carlo simulation to experiment with a stochastic volatility model

Topics: Finance
Year: 2002
OAI identifier: oai:generic.eprints.org:174/core70

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Citations

  1. (1999). A Guide to Variance Swaps, doi
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  5. (1996). Terminal Swap-Rate Models, Working paper,
  6. (2000). Volatility Swaps Made Simple,

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