Volatility swaps valuation under stochastic volatility with jumps and stochastic intensity

Ben-Zhang Yang, Jia Yue, Ming-Hui Wang and Nan-Jing Huang

Applied Mathematics and Computation, 2019, vol. 355, issue C, 73-84

Abstract: In this paper, a pricing formula for volatility swaps is delivered when the underlying asset follows the stochastic volatility model with jumps and stochastic intensity. By using the Feynman–Kac theorem, a partial integral differential equation is obtained to derive the joint moment generating function of the previous model. Moreover, discrete and continuous sampled volatility swap pricing formulas are given by employing the transform technique and the relationship between two pricing formulas is discussed under mild conditions. Finally, some numerical simulations are reported to support the results presented in this paper.

Keywords: Stochastic volatility model with jumps; Stochastic intensity; Volatility derivatives; Pricing (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:apmaco:v:355:y:2019:i:c:p:73-84

DOI: 10.1016/j.amc.2019.02.063

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