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R. J. Elliott, T. K. Siu, L. Chan and J. W. Lau, “Pricing Volatility Swaps Under Heston’s Stochastic Volatility Model with Regime Switching,” Applied Mathematical Finance, Vol. 14, No. 1, 2006, pp. 41-62. doi:10.1080/13504860600659222

has been cited by the following article:

• TITLE: Pricing and Hedging in Stochastic Volatility Regime Switching Models

  AUTHORS: Stéphane Goutte

  KEYWORDS: Stochastic Volatility; Markov Switching; Local Risk Minimization; Hedging; Volatility Derivative

  JOURNAL NAME: Journal of Mathematical Finance, Vol.3 No.1, February 26, 2013

  ABSTRACT: We consider general regime switching stochastic volatility models where both the asset and the volatility dynamics depend on the values of a Markov jump process. Due to the stochastic volatility and the Markov regime switching, this financial market is thus incomplete and perfect pricing and hedging of options are not possible. Thus, we are interested in finding formulae to solve the problem of pricing and hedging options in this framework. For this, we use the local risk minimization approach to obtain pricing and hedging formulae based on solving a system of partial differential equations. Then we get also formulae to price volatility and variance swap options on these general regime switching stochastic volatility models.