JOURNAL ARTICLE

A Note on Variance Swap Greeks.

Published In: Journal of Derivatives, 2024, v. 31, n. 3. P. 115 1 of 3
Database: Business Source Ultimate 2 of 3
Authored By: Kirkby, J. Lars; Rupprecht, Nathaniel; Aguilar, Jean-Philippe 3 of 3

Abstract

This article provides closed-form expressions for spatial Greeks (Delta and Gamma) for discretely monitored realized variance swaps under several common parametric model assumptions. The authors derive closed-form results for stochastic volatility and exponential Lévy models, as well as some approximations in the case of stochastic local volatility. The authors show that variance swap Greeks are inherently sensitive to model assumptions, and the common practice of ignoring the variance swap delta is not always appropriate. In particular, the Delta of a variance swap under a stochastic local volatility model can be quite significant under certain conditions, engendered by the local volatility skew, especially when the contract is close to inception and has many remaining observations. [ABSTRACT FROM AUTHOR]

Additional Information

Source:Journal of Derivatives. 2024/03, Vol. 31, Issue 3, p115
Document Type:Article
Subject Area:Business and Management
Publication Date:2024
ISSN:1074-1240
DOI:10.3905/jod.2023.1.196
Accession Number:176089201
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