Over-the-counter derivatives pricing analytics, mathematical models and independent valuation provider Pricing Partners, has released a new analytical formula for options on variance and volatility swaps.
"The volatility investment theme has been very popular during the last [few] years," said Pricing partner's chief, Eric Benhamou (pictured). By providing analytical computation, we will substantially speed up our valuation platform for these products and provide accurate valuation and Greeks at almost no computing cost, which enables us to shoot for very large volumes on these types of trades."
Based on the latest work from Peter Carr and Roger Lee in mathematical finance, by using matching moment techniques and closed-form solutions, the firm's pricing tool, Price-it Excel, will now be able to price volatility swaps, variance options and volatility options.
Pricing Partners also said that new dedicated keywords will be implemented to enable users to refer directly to these new techniques in their payoff description.