[grads] [Sem-coll] IIT Applied Math Colloquium Today

Hemanshu Kaul kaul at math.iit.edu
Mon Feb 23 09:37:35 CST 2009

Hello all,

This is a reminder that Prof. Roger Lee from University of Chicago will be 
speaking in the Colloquium today at 4:40pm in 106, E1 Bldg. Refreshments 
will be served in 112, E1 around 4:20pm.

I hope to see you all there.


Monday, February 23, 4:40pm, 106, E1
Roger Lee, University of Chicago

"Pricing Variance Swaps on Time-Changed Levy Processes"

A variance swap on an underlying share price S pays at time T the
quadratic variation of log S -- or, as implemented in practice, the
sum of squared daily increments of log(S).  According to the standard
theory (which underpins, for example, the VIX volatility index), a
variance swap has the same value as a contract paying -2 log(S_T/S_0),
assuming that S has continuous paths. Empirically, however, stock
prices jump. We generalize the variance swap valuation theory to a
class of underlying processes with jumps.
Joint with Peter Carr.

Hemanshu Kaul
Assistant Professor of Applied Mathematics
Illinois Institute of Technology, Chicago

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