A note on contracts on quadratic variation
Artikel i vetenskaplig tidskrift, 2017

Given a Black stochastic volatility model for a future F, and a function g, we show that the price of 1/2 integral(T)(0) g(t, F(t))F-2(t) sigma(2)(t)dt can be represented by portfolios of put and call options. This generalizes the classical representation result for the variance swap. Further, in a local volatility model, we give an example based on Dupire's formula which shows how the theorem can be used to design variance related contracts with desirable characteristics.

Författare

CARL LINDBERG

Chalmers, Matematiska vetenskaper, Tillämpad matematik och statistik

Göteborgs universitet

PLoS ONE

1932-6203 (ISSN)

Vol. 12 3 e0174133

Ämneskategorier

Matematik

DOI

10.1371/journal.pone.0174133