We prove that the variance swap rate equals the price of a co-terminal European-style contract when the underlying is an exponential Markov process, time-changed by an arbitrary continuous stochastic clock, which has arbitrary correlation with the driving Markov process. The payoff function $G$ of the European contract that prices the variance swap satisfies an ordinary integro-differential equation, which depends only on the dynamics of the Markov process, not on the clock. We present examples of Markov processes where $G$ can be computed explicitly. In general, the solutions $G$ are not contained in the logarithmic family previously obtained in the special case where the Markov process is a L\'evy process.
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