Capped Equity Swaps Under the Double-Jump Stochastic Volatility Model with Stochastic Interest Rates

摘要

This study proposes a double-jump stochastic volatility model with stochastic interest rates to price capped equity swaps and other multi-period derivative securities. Closed-form solutions for capped equity swaps with a fixed or variable notional principle are derived. In addition, numerical examples are employed to analyze comparative statics properties, counterparty risks, and the dynamics of the forward smile.