Pricing Variance Swaps in a Hybrid Model of Stochastic Volatility and Interest Rate With Regime-switching
| aut.embargo | false | en_NZ |
| aut.publication.place | Cornell University Library | en_NZ |
| aut.relation.reportnumber | arXiv:1603.08289 | en_NZ |
| dark.contributor.author | Cao, J | en_NZ |
| dark.contributor.author | Nazirah Roslan, R | en_NZ |
| dark.contributor.author | Zhang, W | en_NZ |
| dc.date.accessioned | 2016-09-19T04:41:21Z | |
| dc.date.available | 2016-09-19T04:41:21Z | |
| dc.date.copyright | 2016-03-28 | en_NZ |
| dc.date.issued | 2016-03-28 | en_NZ |
| dc.description.abstract | In this paper, we consider the problem of pricing discretely-sampled variance swaps based on a hybrid model of stochastic volatility and stochastic interest rate with regime-switching. Our modeling framework extends the Heston stochastic volatility model by including the CIR stochastic interest rate and model parameters that switch according to a continuous-time observable Markov chain process. A semi-closed form pricing formula for variance swaps is derived. The pricing formula is assessed through numerical implementations, and the impact of including regime-switching on pricing variance swaps is also discussed. | en_NZ |
| dc.identifier.citation | arXiv:1603.08289 [q-fin.MF] | |
| dc.identifier.uri | https://hdl.handle.net/10292/10042 | |
| dc.publisher | arXiv | en_NZ |
| dc.relation.uri | https://arxiv.org/pdf/1603.08289 | en_NZ |
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| dc.rights.accessrights | OpenAccess | en_NZ |
| dc.subject | Heston-CIR hybrid model; Regime-switching; Realized variance; Stochastic interest rate; Stochastic volatility; Variance swap | |
| dc.title | Pricing Variance Swaps in a Hybrid Model of Stochastic Volatility and Interest Rate With Regime-switching | en_NZ |
| dc.type | Commissioned Report | |
| pubs.elements-id | 210994 | |
| pubs.organisational-data | /AUT | |
| pubs.organisational-data | /AUT/Design & Creative Technologies |