Variance swap capped

tfredaigues · April 29th, 2008, 11:09 am

I d like to know how to price a variance swap with a cap?

Antonio · April 29th, 2008, 11:48 am

What do you exactly mean ? Is it a corridor/conditinoal Variance Swap (cap on the level of the stock), or a variance with a cap on the total realised variance ?Do you want to price it assuming a dynamic for the underlying or by some replication strategy ?You should have a look at this old thread :http://www.wilmott.com/messageview.cfm? ... adid=32264

tfredaigues · April 29th, 2008, 1:28 pm

I mean a variance swap with a cap on the total realised variance.

Antonio · April 29th, 2008, 2:31 pm

ok, then the answer is in the thread I mentioned

J2 · May 1st, 2008, 2:15 pm

might be this one http://math.ut.ee/~spartak/papers/varswaptions.pdf

tfredaigues · May 2nd, 2008, 6:50 am

ok, thanks a lot, this paper is perfect!