Variance Swap with Mean Reversion, Multifactor Stochastic Volatility and Jumps

• Main Authors: Pun, Chi Seng, Chung, Shing Fung, Wong, Hoi Ying
• Other Authors: School of Physical and Mathematical Sciences
• Format: Article
• Language: English
• Published: 2016
• Subjects: Mean reversion; Variance swap; Multi-factor stochastic volatility; Pricing; Jump diffusion
• Online Access: https://hdl.handle.net/10356/81385; http://hdl.handle.net/10220/40730
• Institution: Nanyang Technological University

This paper examines variance swap pricing using a model that integrates three major features of financial assets, namely the mean reversion in asset price, multi-factor stochastic volatility (SV) and simultaneous jumps in prices and volatility factors. Closed-form solutions are derived for vanilla v...