This paper is devoted to the pricing of variance and volatility swaps in energy market. We found explicit variance swap formula and closed form volatility swap formula (using Brockhaus-Long approximation) for energy asset with stochastic volatility that follows continuous-time GARCH (1,1) model...

In this paper we study stochastic models for electricity, gas and temperature markets' contracts with delay and jumps. The basic products in these markets are spot, futures and forward contracts, swaps and options written on these. We concentrate our study on pricing of these kind of contracts....

R. Cont and A. de Larrard (SIAM J. Financial Mathematics, 2013) introduced a tractable stochastic model for the dynamics of a limit order book, computing various quantities of interest such as the probability of a price increase or the diffusion limit of the price process. As suggested by...

In this paper, we study financial markets with stochastic volatilities driven by fractional Brownian motion with Hurst index H1/2. Our models include fractional versions of Ornstein-Uhlenbeck, Vasicek, geometric Brownian motion and continuous-time GARCH models. We price variance and volatility...

The valuation of the variance swaps for local Levy based stochastic volatility with delay (LLBSVD) is discussed in this paper. We provide some analytical closed forms for the expectation of the realized variance for the LLBSVD. As applications of our analytical solutions, we fit our model to 10...

In this paper, we model financial markets with semi-Markov volatilities and price covarinace and correlation swaps for this markets. Numerical evaluations of varinace, volatility, covarinace and correlations swaps with semi-Markov volatility are presented as well. The novelty of the paper lies...

The valuation of the variance swaps for local stochastic volatility with delay and jumps is discussed in this paper. We provide some analytical closed forms for the expectation of the realized variance for the stochastic volatility with delay and jumps. Besides, we also present a lower bound for...

The jumps in stock market volatility are found to be so active that this discredits many recently proposed stochastic volatility models without jumps (Bollerslev et al (2008)). The most convincing evidence comes from recent nonparametric work using high-frequency data as in Barndorff-Nielsen and...

In this paper, we introduce an extension to the LIBOR Market model that is suitable to incorporate both sudden market shocks as well as changes in the overall economic climate into the interest rate dynamics. This is achieved by substituting the simple diffusion process of the original LIBOR...

In this paper, we price covariance and correlation swaps for financial markets with Markov-modulated volatilities. As an example, we consider stochastic volatility driven by two-state continuous Markov chain. In this case, numerical example is presented for VIX and VXN volatility indeces (S&P...