Volatility and Variance Swap for the Cogarch(1,1) Model

Abstract

In this paper, we present variance and volatility swaps valuations for the COGARCH (1,1) model intriduced by Kl\"{u}ppelberg, Lindner and Maller (2005). We consider two numerical examples: compound Poisson COGARCH(1,1) and variance gamma COGARCH(1,1) processes. Also, we demonstrate two different situations for the volatility swaps: with and without convexity adjustment to show the difference in price values.

Keywords: COGARCH(1,1) process, variance and volatility swaps, compound Poisson ansd variance gamma CORARCH processes

JEL Classification: C32