Pricing volatility derivatives under the modified constant elasticity of variance model

Abstract

© 2015 Elsevier B.V. All rights reserved. This paper studies volatility derivatives such as variance and volatility swaps, options on variance in the modified constant elasticity of variance model using the benchmark approach. The analytical expressions of pricing formulas for variance swaps are presented. In addition, the numerical solutions for variance swaps, volatility swaps and options on variance are demonstrated