e expand considerations of the section
(
Variance swap pricing
) to the
process
given by
and the
is defined as
before:
We introduce
by the
relationship
then
hence
Observe
that
hence, according to the section
(
Variance swap pricing
)
For the purposes of the next section we need a formula that expresses the
in terms of
.
Hence, we calculate
further


(Fair Variance vs Log contract)

