@article{He2024, 
author = {Xin-Jiang He and Sha Lin},
title = {Analytical formulae for variance and volatility swaps with stochastic volatility, stochastic equilibrium level and regime switching},
year = {2024},
journal = {AIMS Mathematics},
volume = {9},
number = {8},
pages = {22225-22238},
keywords = {nonlinear mean reversion, regime switching, stochastic volatility, analytical, variance and volatility swaps},
url = {https://www.sciopen.com/article/10.3934/math.20241081},
doi = {10.3934/math.20241081},
abstract = {The CIR stochastic volatility model is modified to introduce nonlinear mean reversion, with the long-run volatility average as a random variable controlled by two parts being modeled through a Brownian motion and a Markov chain, respectively. This model still possesses an analytical formulation of the forward characteristic function, from which we establish variance swap prices as well as volatility swap ones with a nonlinear payoff in closed form. The numerical implementation of the two formulae demonstrates the significant impact of regime switching.}
}