Variance Swaps Under No Conditions

Risk Magazine, pp. 82-87, March 2007

12 Pages Posted: 1 Jun 2009

See all articles by Artur Sepp

Artur Sepp

Sygnum Bank's Asset Management

Date Written: January 23, 2007

Abstract

Conditional variance swaps are claims on realized variance which is accumulated when the underlying asset price stays within a certain range. Being highly sensitive to movements in both asset price and its variance, they require a very reliable model for pricing and risk-managing. In this article we apply the Heston stochastic volatility model, which is by now a widely accepted pricing model in many markets, to derive closed-form solutions for pricing and risk-managing of conditional variance swaps.

Keywords: variance swap, conditional variance swaps, volatility derivatives, Heston model, stochastic volatility

JEL Classification: C00, G00

Suggested Citation

Sepp, Artur, Variance Swaps Under No Conditions (January 23, 2007). Risk Magazine, pp. 82-87, March 2007, Available at SSRN: https://ssrn.com/abstract=1412338

Artur Sepp (Contact Author)

Sygnum Bank's Asset Management ( email )

Uetlibergstrasse 134a
Zurich, 8045
Switzerland

HOME PAGE: http://artursepp.com

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
525
Abstract Views
2,154
rank
67,075
PlumX Metrics