Variance and Volatility Swaps in Energy Markets

Download or read book Variance and Volatility Swaps in Energy Markets written by Anatoliy V. Swishchuk and published by . This book was released on 2010 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper is devoted to the pricing of variance and volatility swaps in energy market. We found explicit variance swap formula and closed form volatility swap formula (using Brockhaus-Long approximation) for energy asset with stochastic volatility that follows continuous-time GARCH (1,1) model (mean-reverting) (or Pilipovi '{c} one-factor model). Numerical example is presented for AECO Natural Gas Index (1 May 1998-30 April 1999).