[...]... (2005) Modeling and pricing of variance swaps for stochastic volatilities with delay Wilmott Magazine, 19, September, 63-73 Swishchuk, A (2006) Modeling and pricing of variance swaps for multi-factor stochastic volatilities with delay Canadian Applied Mathematics Quarterly, 14, 4, Winter April 17, 2013 15:36 10 8660: Modeling and Pricing of Swaps ws-book975x65 Modeling and Pricing of Swaps for Financial. .. 17, 2013 15:36 x 8660: Modeling and Pricing of Swaps ws-book975x65 Modeling and Pricing of Swaps for Financial and Energy Markets ARCH(1,1) and for 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 values In Chapter 16, we study financial markets with stochastic volatilities driven... 8660: Modeling and Pricing of Swaps ws-book975x65 Modeling and Pricing of Swaps for Financial and Energy Markets 2.11 2.12 2.10.1 Stochastic Volatility Driven by Fractional Ornstein-Uhlenbeck Process 2.10.2 Stochastic Volatility Driven by Fractional Vasi´ek Process c 2.10.3 Markets with Stochastic Volatility Driven by Geometric Fractional Brownian Motion 2.10.4 Stochastic... volatility smile and volatility skew in observed option prices 1 April 17, 2013 15:36 2 8660: Modeling and Pricing of Swaps ws-book975x65 Modeling and Pricing of Swaps for Financial and Energy Markets In this chapter, we provide an overview of the different types non-stochastic volatilities and the different types of stochastic volatilities There are two approaches to introduce stochastic volatility:... Variance Swaps for Markets with Stochastic Volatility Driven by Geometric fBm 16.5.4 Variance Swaps for Markets with Stochastic Volatility Driven by Fractional Continuous-Time GARCH Process Pricing of Volatility Swaps 16.6.1 Volatility Swaps for Markets with Stochastic Volatility Driven by Fractional Ornstein-Uhlenbeck Process 16.6.2 Volatility Swaps for Markets. .. Variance Swaps 8.1.2 Volatility 87 87 88 April 17, 2013 15:36 xvi 8660: Modeling and Pricing of Swaps ws-book975x65 Modeling and Pricing of Swaps for Financial and Energy Markets 8.2 8.3 8.4 8.5 8.6 Multi-Factor Models 89 Multi-Factor Stochastic Volatility Models with Delay 91 Pricing of Variance Swaps for Multi-Factor Stochastic... volatility and co-dependence found in financial markets and 7 Barndorff-Nielsen, Nicolato and Shephard (2002), Shephard (2005) April 17, 2013 15:36 8 8660: Modeling and Pricing of Swaps ws-book975x65 Modeling and Pricing of Swaps for Financial and Energy Markets stochastic volatility models are used to evaluate derivative securities such as options, swaps – Two approaches to introduce stochastic volatility... Swaps for Markets with Stochastic Volatility Driven by Fractional Vasi´ek Process c 214 215 217 220 223 223 225 225 226 227 227 228 229 230 230 231 231 231 232 232 233 233 234 235 236 April 17, 2013 15:36 xx 8660: Modeling and Pricing of Swaps ws-book975x65 Modeling and Pricing of Swaps for Financial and Energy Markets 16.7 16.8 16.6.3 Volatility Swaps for Markets with Stochastic Volatility... 8660: Modeling and Pricing of Swaps ws-book975x65 Chapter 2 Stochastic Volatility Models 2.1 Introduction In this Chapter, we consider different types of stochastic volatilities that we use in this book They include, in particular: Heston stochastic volatility model; stochastic volatilities with delay; multi-factor stochastic volatilities; stochastic volatilities with delay and jumps; L´vy-based stochastic... in the field of quantitative finance to evaluate derivative securities, such as options, swaps By 1 Black and Scholes (1973), Dupire (1994), Derman and Kani (1994) April 17, 2013 15:36 4 8660: Modeling and Pricing of Swaps ws-book975x65 Modeling and Pricing of Swaps for Financial and Energy Markets assuming that the volatility of the underlying price is a stochastic process rather than a constant, it . x0 y0 w0 h0" alt="" MODELING AND PRICING OF SWAPS FOR FINANCIAL AND ENERGY MARKETS WITH STOCHASTIC VOLATILITIES April 17, 2013 15:36 8660: Modeling and Pricing of Swaps ws-book975x65 This. 2013 15:36 8660: Modeling and Pricing of Swaps ws-book975x65 xiv Modeling and Pricing of Swaps for Financial and Energy Markets 2.10.1 Stochastic Volatility Driven by Fractional Ornstein-Uhlenbeck. Modeling and Pricing of Swaps for Financial and Energy Markets ARCH(1,1) and for variance gamma COGARCH(1,1) processes. Also, we demon- strate two different situations for the volatility swaps: with and