1. Volatility Trading and Variance Derivatives. 1.1. Implied Volatility and Local Volatility. 1.2. Volatility Trading using Options. 1.3. Derivatives on Discrete Realized Variance. 1.4. Replication of Variance Swaps. 1.5. Practical Implementation of Replication: Finite Strikes and Discrete...

Most of the existing pricing models of variance derivative products assume continuous sampling of the realized variance processes, though actual contractual specifications compute the realized variance based on sampling at discrete times. We present a general analytic approach for pricing...

We consider the saddlepoint approximation methods for pricing derivatives whose payoffs depend on the discrete realized variance of the underlying price process of a risky asset. Most of the earlier pricing models of variance products and volatility derivatives use the quadratic variation...

We develop efficient fast Fourier transform algorithms for pricing and hedging discretely sampled variance products and volatility derivatives under additive processes (time-inhomogeneous L evy processes). Our numerical algorithms are non-trivial versions of the Fourier space time stepping...