Download or read book Pricing Vix Options with Stochastic Volatility and Random Jumps written by Guanghua Lian and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study presents an analytical exact solution for the price of VIX options under stochastic volatility model with simultaneous jumps in the asset price and volatility processes. We shall demonstrate that our new pricing formula can be used to efficiently compute the numerical values of a VIX option. While we also show that the numerical results obtained from our formula consistently match those obtained from Monte Carlo simulation perfectly as a verification of the correctness of our formula, numerical evidence is offered to illustrate that the correctness of the formula proposed in Lin & Chang (2009) is in serious doubt. Moreover, some important and distinct properties of VIX options (e.g., put-call parity, hedging ratios) are also examined and discussed.