IDEAS home Printed from https://ideas.repec.org/a/wly/jfutmk/v45y2025i9p1388-1408.html
   My bibliography  Save this article

Analytically Pricing Variance Swaps Under the Hawkes Jump‐Diffusion Process With Liquidity Risks

Author

Listed:
  • Ke Wang
  • Xun‐xiang Guo
  • Yang‐yang Wang
  • Hong‐yu Zhang

Abstract

We investigate variance swap pricing by incorporating a self‐exciting Hawkes process into a stochastic liquidity risk model. Within this framework, we derive closed‐form pricing formulas for discretely sampled variance swaps using two different methods. Through asymptotic analysis, we demonstrate that the discretely sampled pricing formulas converge to their continuously sampled counterparts as the sampling interval approaches zero. Numerical results further highlight the significant impact of jump clustering on the strike prices of variance swaps.

Suggested Citation

  • Ke Wang & Xun‐xiang Guo & Yang‐yang Wang & Hong‐yu Zhang, 2025. "Analytically Pricing Variance Swaps Under the Hawkes Jump‐Diffusion Process With Liquidity Risks," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 45(9), pages 1388-1408, September.
    • Handle: RePEc:wly:jfutmk:v:45:y:2025:i:9:p:1388-1408
    DOI: 10.1002/fut.22603
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/fut.22603
    Download Restriction: no
    File URL: https://libkey.io/10.1002/fut.22603?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:jfutmk:v:45:y:2025:i:9:p:1388-1408. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.interscience.wiley.com/jpages/0270-7314/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.