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Volume 14,     Number 4,     Winter 2006

 

MODELLING AND PRICING OF VARIANCE
SWAPS FOR MULTI-FACTOR STOCHASTIC
VOLATILITIES WITH DELAY
ANATOLIY SWISHCHUK

Abstract. Variance swaps for financial markets with underlying asset and multi-factor stochastic volatilities with delay are modelled and priced in this paper. We obtain some analytical closed forms for the expectation and variance of the realized continuously sampled variances for multi-factor stochastic volatilities with delay. As applications, we provide numerical examples using the S&P60 Canada Index (1998-2002) to price variance swaps with delay for all these models.

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© 2006, Canadian Applied Mathematics Quarterly (CAMQ)