Geman, Hélyette (2005) Pricing options on realized variance. Finance and Stochastics 9 , pp. 453-475. ISSN 0949-2984.
Abstract
Models which hypothesize that returns are pure jump processes with independent increments have been shown to be capable of capturing the observed variation of market prices of vanilla stock options across strike and maturity. In this paper, these models are employed to derive in closed form the prices of derivatives written on future realized quadratic variation. Alternative work on pricing derivatives on quadratic variation has alternatively assumed that the underlying returns process is continuous over time. We compare the model values of derivatives on quadratic variation for the two types of models and find substantial differences.
Metadata
| Item Type: | Article |
|---|---|
| School: | Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School |
| Depositing User: | Sarah Hall |
| Date Deposited: | 02 Jun 2020 16:13 |
| Last Modified: | 02 Aug 2023 18:00 |
| URI: | https://eprints.bbk.ac.uk/id/eprint/32114 |
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