With the introduction of variance swaps, the financial market has experienced an unprecedented trading, investing and hedging in volatilities. These tremendous market activities have led to a parallel systematic development of dynamic volatility modeling. Unlike the stock dynamics, the volatility dynamics are believed to have a meanreverting property. The mean-reverting process consists of two unique features: the equilibrium level and the speed of reversion. The unique mean-reverting feature puts volatilities into an interesing financial class that is worth exploring. The aim of the thesis is to examine the dynamics of volatility and to value volatility derivatives. A primary study is focused on the unification of three areas: variance swap term structures, stock derivatives, and volatility derivatives. It is intended as an attempt to bring together a term structure model, a volatility process and a return process in which they match stylized facts of financial markets and they are consistently reconciled to each other.
| Identifer | oai:union.ndltd.org:bl.uk/oai:ethos.bl.uk:649378 |
| Date | January 2012 |
| Creators | Zhao, Bo |
| Publisher | City University London |
| Source Sets | Ethos UK |
| Detected Language | English |
| Type | Electronic Thesis or Dissertation |
| Source | http://openaccess.city.ac.uk/12168/ |
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