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Capped equity swaps under the double-jump stochastic volatility model with stochastic interest rates

✍ Scribed by Jia-Hau Guo

Publisher: John Wiley and Sons
Year: 2011
Tongue: English
Weight: 257 KB
Volume: 31
Category: Article
ISSN: 0270-7314
DOI: 10.1002/fut.20470

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✦ Synopsis

This study proposes a double-jump stochastic volatility model with stochastic interest rates to price capped equity swaps and other multi-period derivative securities. Closed-form solutions for capped equity swaps with a fixed or variable notional principle are derived. In addition, numerical examples are employed to analyze comparative statics properties, counterparty risks, and the dynamics of the forward smile.