The realised characteristics for Discretisation-Invariant (DI) swaps satisfy the aggregation propertywhen restricted to multivariate processes that are ]  deterministic functions of martingales. Hence DI swaps have model-free fair values, in that a no-arbitrage assumption for forward prices is sufficient to derive exact option replication portfolios with neither jump nor discrete monitoring errors. This restriction allows the characterisation of a vector space of DI swaps which provides a great variety of risk premia .  A sub-class consists of pay-offs with fair values that are also free from numerical integration errors over option strikes , where exact pricing and hedging is possible via dynamic trading strategies on a few simple puts and calls. An SP  500 empirical study on higher-moment and other DI swaps concludes.
Realised pay-offs for discretisation-invariant swaps are those which satisfy a restricted `aggregation property' of Neuberger 2012] for twice continuously differentiable deterministic functions of a multivariate martingale. They are initially characterised as solutions to a second-order system of PDEs, then those pay-offs based on martingale and log-martingale processes alone form a vector space. Hence there exist an infinite variety of other variance and higher-moment risk premia that are less prone to bias than standard variance swaps because their option replication portfolios have no discrete-monitoring or jump errors . Their fair values are also independent of the monitoring partition. A sub-class consists of pay-offs with fair values that are further free from numerical integration errors over option strikes . Here exact pricing and hedging is possible via dynamic trading strategies on a few vanilla puts and calls. An S P 500 empirical study on higher-moment and other DI swaps concludes.
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The realised characteristics for Discretisation-Invariant (DI) swaps satisfy the aggregation propertywhen restricted to multivariate processes that are
Realised pay-offs for discretisation-invariant swaps are those which satisfy a restricted `aggregation property' of Neuberger
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2012
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for twice continuously differentiable
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martingales. Hence DI swaps have model-free fair values, in that a no-arbitrage assumption for forward prices is sufficient to derive exact
a multivariate martingale. They are initially characterised as solutions to a second-order system of PDEs, then those pay-offs based on martingale and log-martingale processes alone form a vector space. Hence there exist an infinite variety of other variance and higher-moment risk premia that are less prone to bias than standard variance swaps because their
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with neither jump nor discrete monitoring errors. This restriction allows the characterisation of a vector space of DI swaps which provides a great variety of risk premia
have no discrete-monitoring or jump errors
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Their fair values are also independent of the monitoring partition.
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also
further
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, where
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simple
vanilla
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