We propose a term structure function, a two-factor variance process and a return process to jointly price SPX and VIX derivatives. The distinctive feature of the variance model is that the factor coefficients are time-varying and they are bonded with the term structure of variance swaps. The...

In this paper we propose a Libor model with a high-dimensional specially structured system of driving CIR volatility processes. A stable calibration prodecure which takes into account a given local correlation structure is presented. The calibration algorithm is FFT based, so fast and easy to...

Volatilities implied from interest rate swaptions are used to assess the size and the sign of the compensation for volatility risk, for dollar, euro and pound rates at a daily frequency, between October 1998 and August 2006. The measurement of the volatility risk premium rests on a simple model...