IDEAS home Printed from
   My bibliography  Save this article

Covariance And Correlation Swaps For Financial Markets With Markov-Modulated Volatilities



    () (Department of Methods and Models for Economics Territory and Finance MEMOTEF, 'Sapienza' University of Rome, Via del Castro Laurenziano, 9, Rome, 00161, Italy)


    () (Department of Mathematics and Statistics, University of Calgary, 2500 University Drive NW, Calgary, Alberta T2N 1N4, Canada)


In this paper, we price covariance and correlation swaps for financial markets with Markov-modulated volatilities. As an example, we consider stochastic volatility driven by a two-state continuous Markov chain. In this case, numerical examples are presented for VIX and VXN volatility indices (S&P 500 and NASDAQ-100, from January 2004 to June 2012). We also use VIX (January 2004 to June 2012) to price variance and volatility swaps for the two-state Markov-modulated volatility, and we present a numerical result in this case.

Suggested Citation

  • Giovanni Salvi & Anatoliy V. Swishchuk, 2014. "Covariance And Correlation Swaps For Financial Markets With Markov-Modulated Volatilities," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 17(01), pages 1-23.
  • Handle: RePEc:wsi:ijtafx:v:17:y:2014:i:01:n:s021902491450006x
    DOI: 10.1142/S021902491450006X

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. repec:wsi:ijtafx:v:14:y:2011:i:06:n:s0219024911006784 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)


    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:wsi:ijtafx:v:17:y:2014:i:01:n:s021902491450006x. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tai Tone Lim). General contact details of provider: .

    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.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.