MSC2010: 05A19, 05A10, 11B73, 11B83. Keywords: Sums of powers, Newton's interpolation formula, Finite differences, Binomial coefficients, Faulhaber's formula ...
We develop here a finite-difference approach for valuing a discretely sampled variance swap within an extended Black–Scholes framework. This approach incorporates the observed volatility skew and is ...