New method revolutionizes pricing of volatility swaps and options in finance!
The article presents a new method to price swaps and options related to realized variance in financial markets. The researchers use a transform-based approach and a continuous-time Markov chain approximation to model the underlying variance process. They consider various stochastic volatility models with jumps and test their framework with numerical experiments. The findings show that their method is highly efficient and accurate for valuing discretely sampled volatility derivatives.