Pricing variance and volatility swaps: a Monte Carlo simulation technique benchmarked to two closed-form solutions

• Autores: Pierre Rostan, Alexandra Rostan, Abderrazak Ait El Trach, Stéphane Mercier
• Localización: Aestimatio: The IEB International Journal of Finance, ISSN 2173-0164, Nº. 5, 2012, págs. 2-27
• Idioma: inglés
• Enlaces
  • Texto completo (pdf)
• Resumen
  • español

    Este artículo presenta una innovadora técnica de reducción de la varianza para mejorar la simulación Monte Carlo (MC) a la hora de valorar swaps de varianza y volatilidad. Esta técnica, previamente aplicada a la valoración de opciones sobre bonos, acelera la convergencia de los estimadores y mejora los resultados MC cuando se referencia a dos soluciones en forma cerrada: Demeterfi et al. (1999) y Javaheri et al. (2004). La técnica de reducción de la varianza propuesta limita el proceso de Wiener dentro de las bandas superior e inferior para acelerar la convergencia hacia los 'verdaderos' valores de ejercicio de los swaps obtenidos con las soluciones en forma cerrada. Los participantes en el mercado, necesitados de metodos numéricos exactos para valorar los swaps de varianza y volatilidad de los swaps, encontrarán esta metodología atractiva y fácil de implementar

  • English

    Our paper introduces an innovative variance reduction technique to improve Monte Carlo (MC) simulation when pricing variance and volatility swaps. This technique previously applied to the pricing of bond options, speeds up the convergence of estimators and improves MC results benchmarked to two closed-form solutions: Demeterfi et al. (1999) and Javaheri et al. (2004). The variance reduction technique constrains the Wiener process inside upper and lower limits to speed up the convergence towards the �true� strike values of the swaps obtained with the closed-form solutions. Market participants in needs of accurate numerical methods for pricing variance and volatility swaps will find our methodology appealing and easy to implement

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