Multiscale stochastic volatility for variance swaps with constant elasticity of variance

Article Computer Science, Interdisciplinary Applications

Multiscale stochastic elasticity of variance for options and equity linked annuity; A Mellin transform approach

Jun-Ho Seo et al.

Summary: This paper introduces a persistent stochastic factor in the underlying asset model to determine the fair value of financial derivatives, with a focus on the elasticity of variance of S&P 500. By extending the elasticity using multiscale stochastic processes, an analytic pricing formula for European options and Equity-Linked-Annuities (ELA) is derived. The results reveal the sensitivity of ELA term structure to the fast-scale or slow-scale related group parameters.

MATHEMATICS AND COMPUTERS IN SIMULATION (2022)

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Article Mathematics, Applied

Pricing variance swaps under hybrid CEV and stochastic volatility

Jiling Cao et al.

Summary: This paper investigates the pricing of a variance swap under a hybrid framework of constant elasticity of variance and stochastic volatility (SVCEV). Using numerical experiments with the S&P 500 options market data, the SVCEV model is calibrated and compared with other volatility models.

JOURNAL OF COMPUTATIONAL AND APPLIED MATHEMATICS (2021)

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Article Business, Finance