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Pricing and hedging variance swaps using stochastic volatility models
Dissertation (MSc)--University of Pretoria, 2019.
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| Format: | Thesis |
| Language: | English |
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University of Pretoria
2020
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| _version_ | 1867613713910988800 |
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| access_status_str | Open Access |
| author2 | Mare, Eben |
| author_browse | Mare, Eben |
| author_facet | Mare, Eben |
| collection | Thesis |
| dc_rights_str_mv | © 2019 University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria. |
| description | Dissertation (MSc)--University of Pretoria, 2019. |
| format | Thesis |
| id | oai:repository.up.ac.za:2263/73185 |
| institution | University of Pretoria (South Africa) |
| language | English |
| last_indexed | 2026-06-10T12:40:31.851Z |
| license_str | Other — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from UPSpace — University of Pretoria Institutional Repository |
| publishDate | 2020 |
| publishDateRange | 2020 |
| publishDateSort | 2020 |
| publisher | University of Pretoria |
| publisherStr | University of Pretoria |
| record_format | dspace |
| source_str | UPSpace — University of Pretoria Institutional Repository |
| spelling | oai:repository.up.ac.za:2263/73185 Pricing and hedging variance swaps using stochastic volatility models Mare, Eben u13110782@tuks.co.za Bopoto, Kudakwashe UCTD Stochastic volatility Mathematical Finance Variance Swaps Pricing and Hedging Dissertation (MSc)--University of Pretoria, 2019. In this dissertation, the price of variance swaps under stochastic volatility models based on the work done by Barndorff-Nielsen and Shepard (2001) and Heston (1993) is discussed. The choice of these models is as a result of properties they possess which position them as an improvement to the traditional Black-Scholes (1973) model. Furthermore, the popularity of these models in literature makes them particularly attractive. A lot of work has been done in the area of pricing variance swaps since their inception in the late 1990’s. The growth in the number of variance contracts written came as a result of investors’ increasing need to be hedged against exposure to future variance fluctuations. The task at the core of this dissertation is to derive closed or semi-closed form expressions of the fair price of variance swaps under the two stochastic models. Although various researchers have shown that stochastic models produce close to market results, it is more desirable to obtain the fair price of variance derivatives using models under which no assumptions about the dynamics of the underlying asset are made. This is the work of a useful analytical formula derived by Demeterfi, Derman, Kamal and Zou (1999) in which the price of variance swaps is hedged through a finite portfolio of European call and put options of different strike prices. This scheme is practically explored in an example. Lastly, conclusions on pricing using each of the methodologies are given. Mathematics and Applied Mathematics MSc (Financial Engineering) Unrestricted 2020-02-11T07:23:38Z 2020-02-11T07:23:38Z 2020-04 2019 Dissertation Bopoto, K 2019, Pricing and hedging variance swaps using stochastic volatility models, MSc (Financial Engineering) Dissertation, University of Pretoria, Pretoria, viewed yymmdd <http://hdl.handle.net/2263/73185> A2020 http://hdl.handle.net/2263/73185 en © 2019 University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria. application/pdf University of Pretoria |
| spellingShingle | UCTD Stochastic volatility Mathematical Finance Variance Swaps Pricing and Hedging Pricing and hedging variance swaps using stochastic volatility models |
| title | Pricing and hedging variance swaps using stochastic volatility models |
| title_full | Pricing and hedging variance swaps using stochastic volatility models |
| title_fullStr | Pricing and hedging variance swaps using stochastic volatility models |
| title_full_unstemmed | Pricing and hedging variance swaps using stochastic volatility models |
| title_short | Pricing and hedging variance swaps using stochastic volatility models |
| title_sort | pricing and hedging variance swaps using stochastic volatility models |
| topic | UCTD Stochastic volatility Mathematical Finance Variance Swaps Pricing and Hedging |
| url | http://hdl.handle.net/2263/73185 |