Pricing Variance Swaps in a Hybrid Model of Stochastic Volatility and Interest Rate with Regime-Switching
Pricing Variance Swaps in a Hybrid Model of Stochastic Volatility and Interest Rate with Regime-Switching
复制标题
具有机制切换的随机波动率和利率混合模型中的定价方差互换
DOI：
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发表时间：
2016
影响因子：
0.9
通讯作者：
Wenjun Zhang
中科院分区：
文献类型：
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作者：
Jiling Cao;Teh Raihana Nazirah Roslan;Wenjun Zhang
本文研究了基于随机波动率和随机利率混合模型的离散样本方差互换定价问题。我们的建模框架扩展了赫斯顿随机波动率模型，包括Cox-Ingersoll-Ross（CIR）随机利率模型。此外，在我们的模型中的某些模型参数切换根据连续时间可观测马尔可夫链过程。这使得我们的模型能够捕捉到一些宏观经济问题，例如交替的商业周期。推导了方差互换的半封闭式定价公式。定价公式进行评估，通过数值实现，我们验证我们的定价公式对蒙特卡洛模拟。将政权转换的差异互换定价的影响也进行了讨论，在我们的模型中，方差互换价格与政权转换的影响进行了检查。我们还探讨了方差互换价格的经济后果，允许赫斯顿-CIR模型在三个不同的制度切换。
In this paper, we consider the problem of pricing discretely-sampled variance swaps based on a hybrid model of stochastic volatility and stochastic interest rate with regime-switching. Our modeling framework extends the Heston stochastic volatility model by including the Cox-Ingersoll-Ross (CIR) stochastic interest rate model. In addition, certain model parameters in our model switch according to a continuous-time observable Markov chain process. This enables our model to capture several macroeconomic issues such as alternating business cycles. A semi-closed form pricing formula for variance swaps is derived. The pricing formula is assessed through numerical implementation, where we validate our pricing formula against the Monte Carlo simulation. The impact of incorporating regime-switching for pricing variance swaps is also discussed, where variance swaps prices with and without regime-switching effects are examined in our model. We also explore the economic consequence for the prices of variance swaps by allowing the Heston-CIR model to switch across three different regimes.