Volatility Derivatives Practical Notes
18 Pages Posted: 19 Jun 2015
Date Written: March 18, 2015
We present in this paper the practical aspects of pricing of variance swaps, volatility swaps, variance options and volatility options under the model of Carr and Lee. Popular related derivative products to the pure vanilla variance swaps are reviewed: the forward starting variance swaps, variance swaps on a foreign asset, variance caps and floors. We will also pay attention at the effect of cash dividends on the variance swap price.
Keywords: variance swap, volatility swap, replication, Filon, oscillatory integrand, finance
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