Forward start volatility swaps in rough volatility models (Forthcoming in Asia-Pacific Financial Markets)

Elisa Alòs, Frido Rolloos and Kenichiro Shiraya
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Elisa Alòs: Dpt. d’Economia i Empresa, Universitat Pompeu Fabra
Kenichiro Shiraya: Graduate School of Economics, The University of Tokyo

No CARF-F-544, CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo

Abstract: This paper shows the relationship between the forward start volatility swap price and the forward start zero vanna implied volatility of forward start options in rough volatility models. It is shown that in the short time-to-maturity limit the approximation error in the leading term of the correlated case with H∈(0,1/2) does not depend on the time to forward start date, but only on the difference between the maturity date and forward start date and on the Hurst parameter H.

Date: 2022-08
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Persistent link: https://EconPapers.repec.org/RePEc:cfi:fseres:cf544

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