2012-06-05 papers

on Market Microstructure

Issue of 2012‒06‒05
one paper chosen by
Thanos Verousis

Modeling and Pricing of Covariance and Correlation Swaps for Financial Markets with Semi-Markov Volatilities By Giovanni Salvi; Anatoliy V. Swishchuk

Modeling and Pricing of Covariance and Correlation Swaps for Financial Markets with Semi-Markov Volatilities

By:	Giovanni Salvi; Anatoliy V. Swishchuk
Abstract:	In this paper, we model financial markets with semi-Markov volatilities and price covarinace and correlation swaps for this markets. Numerical evaluations of vari- nace, volatility, covarinace and correlations swaps with semi-Markov volatility are presented as well. The novelty of the paper lies in pricing of volatility swaps in closed form, and pricing of covariance and correlation swaps in a market with two risky assets.
Date:	2012–05
URL:	http://d.repec.org/n?u=RePEc:arx:papers:1205.5565&r=mst

This issue is ©2012 by Thanos Verousis. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.

General information on the NEP project can be found at https://nep.repec.org. For comments please write to the director of NEP, Marco Novarese at <director@nep.repec.org>. Put “NEP” in the subject, otherwise your mail may be rejected.

NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.