Carr and Wu show that we can replicate the payoff from the variance swap
rate in which the contracted payoff depends on the difference between the pre-fixed variance swap
rate and the realized return variance that is computed ex post by using out-of-money option prices.
Content includes volatility surfaces, variance swap
curves and forward curves for the top 13 global equity indices, with maturities from one month up to 10 years and strikes between 5% and 400% of spot.
The new S&P 500 Variance futures contract is designed to offer benefits to both current OTC users as well as to customers who have not traditionally participated in the OTC variance swap
2], which is realized over the life of the contract, and a fixed variance swap
Variance futures replicate the pay-off profile of a variance swap
using a daily-margined futures contract.
The graduate textbook explores variance and volatility swaps for financial markets with underlying assets following the Heston model, the valuation of variance swaps
for stochastic volatilities with delay, a semi-Markov modulated market consisting of a riskless bond and a risky stock, variance and volatility swaps for volatilities driven by fractional Brownian motion, and explicit option pricing of a mean-reverting asset in energy markets.
Discrete and continuosly sampled volatility and variance swaps
They have removed the need for investors to trade volatility through variance swaps