Pricing Models of Volatility Products and Exotic Variance Derivatives

Yue Kuen Kwok, Wendong Zheng

• Publisher: Chapman and Hall/CRC
• Year: 2022
• Print ISBN: 9781032204321
• eBook ISBN: 9781000584271
• Edition: 1
• Topic: Business
• Subtopic: Finance
• Index: Business

Pricing Models of Volatility Products and Exotic Variance Derivatives summarizes most of the recent research results in pricing models of derivatives on discrete realized variance and VIX. The book begins with the presentation of volatility trading and uses of variance derivatives. It then moves on to discuss the robust replication strategy of variance swaps using portfolio of options, which is one of the major milestones in pricing theory of variance derivatives. The replication procedure provides the theoretical foundation of the construction of VIX. This book provides sound arguments for formulating the pricing models of variance derivatives and establishes formal proofs of various technical results. Illustrative numerical examples are included to show accuracy and effectiveness of analytic and approximation methods.

Features

• Useful for practitioners and quants in the financial industry who need to make choices between various pricing models of variance derivatives
• Fabulous resource for researchers interested in pricing and hedging issues of variance derivatives and VIX products
• Can be used as a university textbook in a topic course on pricing variance derivatives

Table of contents

• Cover Page
• Half-Title Page
• Series Page
• Title Page
• Copyright Page
• Dedication Page
• Contents
• Preface
• 1 Volatility Trading and Variance Derivatives
• 2 Lévy Processes and Stochastic Volatility Models
• 3 VIX Derivatives under Consistent Models and Direct Models
• 4 Swap Products on Discrete Variance and Volatility
• 5 Options on Discrete Realized Variance
• 6 Timer Options
• Bibliography
• Index