Modeling of Variance Swap and Improved Control Variatefor Monte Carlo method
This study proposes the partial differential equation pricing model for the Variance Swap derivatives under the stochastic volatility structure. Control variate technique is applied to valuation of the derivatives, based on the closed form solutions in a simpler model. Then with the analysis of the moments for the underlying processes, a method to choose high efficient control variate for Monte Carlo simulation is provided. The computation results show that our method can reduce variance efficiently, and are in line with the theoretical analysis. The method in the paper can also be extended to the valuation of other types of Variance Swaps, such as Corridor Variance Swap, Gamma Variance Swap, Conditional Variance Swap and other products with multi-factor models.
Variance Swap stochastic volatility Monte Carlo method Control Variate
Junmei Ma Chenglong Xu
Department of Mathematics Tongji University Shanghai, 200092, China Department of Mathematics Tongji University Shanghai E-Institute of Scientific Computing Shanghai No
国际会议
北京
英文
735-739
2009-07-24（万方平台首次上网日期，不代表论文的发表时间）