Variance swap replication: Discrete or continuous?

The popular replication formula to price variance swaps assumes continuity of traded option strikes. In practice, however, there is only a discrete set of option strikes traded on the market. We present here different discrete replication strategies and explain why the continuous replication price is more relevant.

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Year of publication:	2018
Authors:	Le Floc'h, Fabien
Published in:	Journal of Risk and Financial Management. - Basel : MDPI, ISSN 1911-8074. - Vol. 11.2018, 1, p. 1-15
Publisher:	Basel : MDPI
Subject:	variance swap \| volatility \| derivatives \| quantitative finance

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Type of publication:	Article
Type of publication (narrower categories):	Article
Language:	English
Other identifiers:	10.3390/jrfm11010011 [DOI] 1024009238 [GVK] hdl:10419/238858 [Handle]
Source:	EconStor

Persistent link: https://www.econbiz.de/10012610999