Analytical formulas for pricing discretely-sampled skewness and kurtosis swaps based on Schwartz’ s one-factor model

Abstract

In this paper, analytical formulas for pricing discretely-sampled skewness and kurtosis swaps based on the Schwartz’s one-factor model is derived by applying the results of the conditional moments proposed by Chumpong, Mekchay, and Rujivan (2019). The results would be beneficial for market practitioners to describe commodity prices. The analytical pricing formulas for the skewness and kurtosis swaps of commodity will be useful for hedging against price volatility risks in commodity markets.

Keywords

• skewness swaps
• kurtosis swaps
• discrete sampling
• schwartz’s model