Semiclassical Pricing of Variance Swaps in the CEV Model

D 2022

Semiclassical Pricing of Variance Swaps in the CEV Model

ARANEDA, Axel A. and Marcelo J. VILLENA

Basic information

Original name

Semiclassical Pricing of Variance Swaps in the CEV Model

Authors

ARANEDA, Axel A. (152 Chile, belonging to the institution) and Marcelo J. VILLENA

Edition

1. vyd. Cham, Mathematical and Statistical Methods for Actuarial Sciences and Finance. p. 25-30, 6 pp. 2022

Publisher

Springer

Other information

Language

English

Type of outcome

Stať ve sborníku

Field of Study

50206 Finance

Confidentiality degree

není předmětem státního či obchodního tajemství

Publication form

electronic version available online

References:

URL

RIV identification code

RIV/00216224:14560/22:00125661

Organization unit

Faculty of Economics and Administration

ISBN

978-3-030-99637-6

DOI

http://dx.doi.org/10.1007/978-3-030-99638-3_5

Keywords in English

Path Integral; CEV model; Variance swap

Abstract

V originále

Path integrals are a well-known tool in quantum mechanics and statistical physics. They could be used to derive the propagator or kernel of stochastic processes, analogous to solving the Fokker-Planck equation. In finance, they become an alternative tool to address the valuation of derivatives. Here, taking advantage of the hedging formula of the realized variance by means of the log contract, we use path integrals for the pricing of variance swaps under the Constant Elasticity of Variance (CEV) model, approximating analytically the propagator for the log contract by semiclassical arguments. Our results demonstrate that the semiclassical method provides an alternative and efficient computation which shows a high level of accuracy but at the same time lower execution times.

Links

EF18_053/0016952, research and development project

Name: Postdoc2MUNI

Citovat

ARANEDA, Axel A. and Marcelo J. VILLENA. Semiclassical Pricing of Variance Swaps in the CEV Model. Online. In Corazza, M., Perna, C., Pizzi, C., Sibillo, M. Mathematical and Statistical Methods for Actuarial Sciences and Finance. 1st ed. Cham: Springer, 2022, p. 25-30. ISBN 978-3-030-99637-6. Available from: https://dx.doi.org/10.1007/978-3-030-99638-3_5.

@inproceedings{1846978,
   author = {Araneda, Axel A. and Villena, Marcelo J.},
   address = {Cham},
   booktitle = {Mathematical and Statistical Methods for Actuarial Sciences and Finance.},
   doi = {http://dx.doi.org/10.1007/978-3-030-99638-3_5},
   edition = {1},
   editor = {Corazza, M., Perna, C., Pizzi, C., Sibillo, M.},
   keywords = {Path Integral; CEV model; Variance swap},
   howpublished = {elektronická verze "online"},
   language = {eng},
   location = {Cham},
   isbn = {978-3-030-99637-6},
   pages = {25-30},
   publisher = {Springer},
   title = {Semiclassical Pricing of Variance Swaps in the CEV Model},
   url = {https://link.springer.com/chapter/10.1007/978-3-030-99638-3_5},
   year = {2022}
}

TY  - JOUR
ID  - 1846978
AU  - Araneda, Axel A. - Villena, Marcelo J.
PY  - 2022
TI  - Semiclassical Pricing of Variance Swaps in the CEV Model
PB  - Springer
CY  - Cham
SN  - 9783030996376
KW  - Path Integral
KW  - CEV model
KW  - Variance swap
UR  - https://link.springer.com/chapter/10.1007/978-3-030-99638-3_5
N2  - Path integrals are a well-known tool in quantum mechanics and statistical physics. They could be used to derive the propagator or kernel of stochastic processes, analogous to solving the Fokker-Planck equation. In finance, they become an alternative tool to address the valuation of derivatives. Here, taking advantage of the hedging formula of the realized variance by means of the log contract, we use path integrals for the pricing of variance swaps under the Constant Elasticity of Variance (CEV) model, approximating analytically the propagator for the log contract by semiclassical arguments. Our results demonstrate that the semiclassical method provides an alternative and efficient computation which shows a high level of accuracy but at the same time lower execution times.
ER  -

ARANEDA, Axel A. and Marcelo J. VILLENA. Semiclassical Pricing of Variance Swaps in the CEV Model. Online. In Corazza, M., Perna, C., Pizzi, C., Sibillo, M. \textit{Mathematical and Statistical Methods for Actuarial Sciences and Finance.}. 1st ed. Cham: Springer, 2022, p.~25-30. ISBN~978-3-030-99637-6. Available from: https://dx.doi.org/10.1007/978-3-030-99638-3\_{}5.

Detailed Information on Publication Record