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

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  • Jia‐Hau Guo

Abstract

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. © 2010 Wiley Periodicals, Inc. Jrl Fut Mark 31:340–370, 2011

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  • Jia‐Hau Guo, 2011. "Capped equity swaps under the double‐jump stochastic volatility model with stochastic interest rates," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 31(4), pages 340-370, April.
    • Handle: RePEc:wly:jfutmk:v:31:y:2011:i:4:p:340-370
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