Tid: 15 juni 2009 kl 16.15-17.00

Plats : Seminarierummet 3733, Institutionen för matematik, KTH, Lindstedts väg 25, plan 7. Karta!

Föredragshållare: Philip Nicolin

Titel: Variance Risk Premiums in Currency Options (Examensarbete – Master thesis)

Abstract

Synthetic variance swap rates, computed from currency option implied volatility quotes using the vanna-volga method, are compared to realized exchange rate variance in an effort to determine the existence of a variance risk premium. Due to conflicting results for different time periods and different currency pairs, no conclusion is reached. The variance swap rate consistent with vanna-volga prices is found to be given by a simple expression, but may significantly underestimate the true variance swap rate. Since for currency variance swaps the notional amount could be given in either of the two involved currencies there are two variance swap rates. The difference between the two rates is explored and is found to be small and determined by the slope of the implied volatility smile.

The full report (pdf)

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