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Based on the theory of static replication of variance swaps we assess the sign and magnitude of variance risk premiums … general shape of the implied volatility function of the corresponding currency pair. Overall, we conclude that there is a …
Persistent link: https://www.econbiz.de/10010410031
Credit Default Swaps (CDS) on a reference entity may be traded in multiple currencies, in that protection upon default may be offered either in the domestic currency where the entity resides, or in a more liquid and global foreign currency. In this situation currency fluctuations clearly...
Persistent link: https://www.econbiz.de/10012936666
are split into three components. The first component allows us to match the volatility term structure, the second … generates stochastic volatility, and the third one accommodates for stochastic skew. The model is parsimonious, yet flexible …
Persistent link: https://www.econbiz.de/10009558358
Extended Nelson-Siegel models are widely used by e.g. practitioners and central banks to estimate current term structures of riskless zero-coupon interest rates, whereas other models such as the extended Vasicek model (a.k.a. the Hull-White model) are popular for pricing interest rate...
Persistent link: https://www.econbiz.de/10013084775
Skewness is specifically considered to develop semi-parametric upper bounds for option prices and expected payoffs for call options. Bounds on variance default swaps, a new asset, and for the variance risk premium are derived.The Technical Proof for this paper is available at the following URL:...
Persistent link: https://www.econbiz.de/10013089436
Traditionally volatility is viewed as a measure of variability, or risk, of an underlying asset. However recently … investors began to look at volatility from a different angle. It happened due to emergence of a market for new derivative … instruments - variance swaps. In this paper first we introduce the general idea of the volatility trading using variance swaps …
Persistent link: https://www.econbiz.de/10012966298
The pricing of the European cash-settled swaptions is analysed. The standard market formula results are compared to results obtained from different models. Significant discrepancies are observed, justifying the title
Persistent link: https://www.econbiz.de/10013132576
This study presents a set of closed-form exact solutions for pricing discretely sampled variance swaps and volatility … swaps, based on the Heston stochastic volatility model with regime switching. In comparison with all the previous studies in … the literature, this research, which obtains closed-form exact solutions for variance and volatility swaps with discrete …
Persistent link: https://www.econbiz.de/10013106157
The problem of developing sensitivities of exotic interest rates derivatives to the observed implied volatilities of caps and swaptions is considered. It is shown how to compute these from sensitivities to model volatilities in the displaced diffusion LIBOR market model. The example of a...
Persistent link: https://www.econbiz.de/10013149157
Variance Swap ; Dispersion Trading ; Gamma Swap ; Variance Swap ; Volatility Replication ; Volatility Trading …Traditionally volatility is viewed as a measure of variability, or risk, of an underlying asset. However recently … investors began to look at volatility from a different angle. It happened due to emergence of a market for new derivative …
Persistent link: https://www.econbiz.de/10003952648