In this thesis, the research focuses on the development and implementation of two hybrid models for pricing variance swaps and variance options. Some variance derivatives (i.e., variance swap) are priced using portfolios of put and call options. However, longer-term options price not only stock...

In this dissertation we propose a new model which captures observed features of asset prices. The model reproduces the skewness and fat tails of asset returns by introducing a discretized variance gamma process as the driving innovation process, in addition to a double gamma process to reflect...

In this thesis two contributions are made to the area of mathematical finance. First, in order to explain the non-trivial skewness and kurtosis that is observed in the time series data of constant maturity swap (CMS) rates, we employ the pure jump Levy processes, i.e. in particular Variance...