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http://dx.doi.org/10.7737/MSFE.2013.19.1.049

Variance Swap Pricing with a Regime-Switching Market Environment  

Roh, Kum-Hwan (Department of Mathematics, Hannam University)
Publication Information
Management Science and Financial Engineering / v.19, no.1, 2013 , pp. 49-52 More about this Journal
Abstract
In this paper we provide a valuation formula for a variance swap with regime switching. A variance swap is a forward contract on variance, the square of realized volatility of the underlying asset. We assume that the volatility of underlying asset is governed by Markov regime-switching process with finite states. We find that the proposed model can provide ease of calculation and be superior to the models currently available.
Keywords
Variance Swap; Regime-Switching;
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