This paper is an extension to a recent paper Zhu and Lian (2009), in which a closed-form exact solution was presented for the price of variance swaps with a particular definition of the realized variance. Here, we further demonstrate that our approach is quite versatile and can be used for other...

In this study we present a closed-form, exact solution for the pricing of VIX futures in a stochastic volatility model with simultaneous jumps in both the asset price and volatility processes. The newly derived formula is then used to show that the well-known convexity correction approximations...

In 2009, Avellaneda and Lipkin (A&L) proposed a dynamic model for hard-to-borrow stocks, in which the stock price and the buy-in rate, an additional factor introduced by them, are full coupled. In order to obtain a semi-explicit pricing formula for European call options, A&L had to make an...

In an incomplete market model where convex trading constraints are imposed upon the underlying assets, it is no longer possible to obtain unique arbitrage-free prices for derivatives using standard replication arguments. Most existing derivative pricing approaches involve the selection of a...