Research Article
Variance Swap Pricing under Markov-Modulated Jump-Diffusion Model
| Notations | Parameters | Regime I | Regime II |
| | Interest rate | 0.06 | 0.03 | | Appreciation rate | 0.08 | 0.04 | | Mean reversion rate | 3.46 | 3.46 | | Mean reversion value | 0.009 | 0.004 | | Volatility of volatility | 0.14 | 0.14 | | Correlation coefficient | | | | Jump intensity | 0.2 | 0.1 |
| Merton jump |
| | Mean of jump size | 0.05 | 0.04 | | Jump size volatility | 0.086 | 0.078 |
| Kou jump |
| | Inverse mean one | 25 | 20 | | Inverse mean two | 50 | 45 | | Exponential occurrences | 0.2 | 0.16 |
|
|