In this paper, we price covariance and correlation swaps for financial markets with Markov-modulated volatilities. As an example, we consider stochastic volatility driven by a two-state continuous Markov chain. In this case, numerical examples are presented for VIX and VXN volatility indices...

In this article, we study stochastic orders over an interval. Mainly, we focus on orders related to the Laplace transform. The results are then applied to obtain a bound for heavy-tailed distributions and are illustrated by some examples. We also indicate how these ordering relationships can be...

We investigate the effect of discrete sampling and asset price jumps on fair variance and volatility swap strikes. Fair discrete volatility strikes and fair discrete variance strikes are derived in different models of the underlying evolution of the asset price: the Black-Scholes model, the...

A model is developed for pricing volatility derivatives, such as variance swaps and volatility swaps under a continuous-time Markov-modulated version of the stochastic volatility (SV) model developed by Heston. In particular, it is supposed that the parameters of this version of Heston's SV...

We show that if the discounted Stock price process is a continuous martingale, then there is a simple relationship linking the variance of the terminal Stock price and the variance of its arithmetic average. We use this to establish a model-independent upper bound for the price of a continuously...