Analytical pricing formulas for hybrid variance swaps with regime-switching
The problem of pricing discretely-sampled variance swaps under stochastic volatility, stochastic interest rate and regime-switching is being considered in this paper. An extension of the Heston stochastic volatility model structure is done by adding the Cox-Ingersoll-Ross (CIR) stochastic interest r...
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my.uum.repo.248912018-12-11T02:33:15Z http://repo.uum.edu.my/24891/ Analytical pricing formulas for hybrid variance swaps with regime-switching Roslan, Teh Raihana Nazirah Cao, Jiling Zhang, Wenjun The problem of pricing discretely-sampled variance swaps under stochastic volatility, stochastic interest rate and regime-switching is being considered in this paper. An extension of the Heston stochastic volatility model structure is done by adding the Cox-Ingersoll-Ross (CIR) stochastic interest rate model. In addition, the parameters of the model are permitted to have transitions following a Markov chain process which is continuous and discoverable. This hybrid model can be used to illustrate certain macroeconomic conditions, for example the changing phases of business stages. The outcome of our regime-switching hybrid model is presented in terms of analytical pricing formulas for variance swaps. 2017 Conference or Workshop Item NonPeerReviewed Roslan, Teh Raihana Nazirah and Cao, Jiling and Zhang, Wenjun (2017) Analytical pricing formulas for hybrid variance swaps with regime-switching. In: Analytical pricing formulas for hybrid variance swaps with regime-switching, 2017. (Unpublished) http://doi.org/10.1063/1.5012177 doi:10.1063/1.5012177 |
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The problem of pricing discretely-sampled variance swaps under stochastic volatility, stochastic interest rate and regime-switching is being considered in this paper. An extension of the Heston stochastic volatility model structure is done by adding the Cox-Ingersoll-Ross (CIR) stochastic interest rate model. In addition, the parameters of the model are permitted to have transitions following a Markov chain process which is continuous and discoverable. This hybrid model can be used to illustrate certain macroeconomic conditions, for example the changing phases of business stages. The outcome of our regime-switching hybrid model is presented in terms of analytical pricing formulas for variance swaps. |
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Conference or Workshop Item |
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Roslan, Teh Raihana Nazirah Cao, Jiling Zhang, Wenjun |
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Roslan, Teh Raihana Nazirah Cao, Jiling Zhang, Wenjun Analytical pricing formulas for hybrid variance swaps with regime-switching |
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Roslan, Teh Raihana Nazirah Cao, Jiling Zhang, Wenjun |
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Roslan, Teh Raihana Nazirah |
title |
Analytical pricing formulas for hybrid variance swaps with regime-switching |
title_short |
Analytical pricing formulas for hybrid variance swaps with regime-switching |
title_full |
Analytical pricing formulas for hybrid variance swaps with regime-switching |
title_fullStr |
Analytical pricing formulas for hybrid variance swaps with regime-switching |
title_full_unstemmed |
Analytical pricing formulas for hybrid variance swaps with regime-switching |
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analytical pricing formulas for hybrid variance swaps with regime-switching |
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2017 |
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http://repo.uum.edu.my/24891/ http://doi.org/10.1063/1.5012177 |
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