Abstract
In a recent study, we present a tree methodology to evaluate the expected generalized realized variance in a general stochastic volatility model. This provides an efficient way of calculating the fair value of the strike for variance swaps. In this article, we expand the methodology to price nonlinear derivatives written on realized variance. Particularly we introduce a new option contract a Bermudan variance swaption, defined as an option on variance swap with early exercise dates. Within the same framework, we also show how to value forward-start variance swaps, VIX futures and VIX options. Numerical tests show that the methodology introduced is efficient and accurate.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
