Considering the fair strike values of variance and volatility swaps, we use a stochastic volatility model in which the log volatility is given by a fractional Ornstein-Uhlenbeck process with two versions; a stationary version and a version with a deterministic initial value. Under these...

The corrected diffusion effects caused by a noncentered stochastic system are studied in this paper. A diffusion limit theorem or CLT of the system is derived with the convergence error estimate. The estimate is obtained for large t (on the interval (0,t*), t* of the order of [var epsilon]-1)....

In general, the pricing problems of exotic options in finance do not have analytic solutions under stochastic volatility and so it is hard to compute the option prices or at least it requires much of time to compute them. This paper investigates a semi-analytic pricing method for lookback...