Pricing variance swaps by using two methods : replication strategy and a stochastic volatility model

Description

<p>In this paper we investigate pricing of variance swaps contracts. The</p><p>literature is mostly dedicated to the pricing using replication with</p><p>portfolio of vanilla options. In some papers the valuation with stochastic</p><p>volatility models is discussed as well. Stochastic volatility is becoming</p><p>more and more interesting to the investors. Therefore we decided to</p><p>perform valuation with the Heston stochastic volatility model, as well</p><p>as by using replication strategy.</p><p>The thesis was done at SunGard Front Arena, so for testing the replica-</p><p>tion strategy Front Arena software was used. For calibration and testing</p><p>of the Heston model we used MatLab.</p>

Links & Downloads

1. http://urn.kb.se/resolve?urn=urn:nbn:se:hh:diva-2197
2. Local 2082/2594

Tags

Variance swaps

Heston model

Stochastic volatility

Additional Fields

Identifer	oai:union.ndltd.org:UPSALLA/oai:DiVA.org:hh-2197
Date	January 2008
Creators	Petkovic, Danijela
Publisher	Halmstad University, School of Information Science, Computer and Electrical Engineering (IDE), Högskolan i Halmstad/Sektionen för Informationsvetenskap, Data- och Elektroteknik (IDE)
Source Sets	DiVA Archive at Upsalla University
Language	English
Detected Language	English
Type	Student thesis, text