Most of the existing pricing models of variance derivative products assume continuous sampling of the realized variance processes, though actual contractual specifications compute the realized variance based on sampling at discrete times. We present a general analytic approach for pricing...

We consider the saddlepoint approximation methods for pricing derivatives whose payoffs depend on the discrete realized variance of the underlying price process of a risky asset. Most of the earlier pricing models of variance products and volatility derivatives use the quadratic variation...

We propose robust numerical algorithms for pricing discrete variance options and volatility swaps under general time-changed Lèvy processes. Since analytic pricing formulas of these derivatives are not available, some of the earlier pricing methods use the quadratic variation approximation for...

1. Volatility Trading and Variance Derivatives. 1.1. Implied Volatility and Local Volatility. 1.2. Volatility Trading using Options. 1.3. Derivatives on Discrete Realized Variance. 1.4. Replication of Variance Swaps. 1.5. Practical Implementation of Replication: Finite Strikes and Discrete...

Timer options are barrier style options in the volatility space. A typical timer option is similar to its European vanilla counterpart, except with uncertain expiration date. The finite-maturity timer option expires either when the accumulated realized variance of the underlying asset has...