Volatility Swap

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Volatility Swap

A forward contract on the volatility of a security. The underlying of a volatility swap is usually the volatility of a currency. A volatility swap allows the investor to speculate on volatility, just as a trader might speculate on the price of a stock.
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In addition, support for equities has expanded with the inclusion of equity volatility swaps. The work on version 5.10 is expected to start in October, and will focus on reporting, clearing and electronic execution.
To this end, the new financial products are variance and volatility swaps, which play a decisive role in volatility hedging and speculation.
Volatility swaps allow investors to trade and to control the volatility of an asset directly.
Thus, to calculate volatility swaps we need both E(V) and Var(V).
In this section we reformulated the results obtained in [12], which are needed for study of variance and volatility swaps, and price of pseudovariance, pseudovolatility, and the problems proposed by He and Wang [13] for financial markets with deterministic volatility as a function of time.
of Calgary) introduces mathematical equations for modeling the price of swaps in the financial and energy markets with different stochastic volatilities, and presents a variance drift adjusted version of the Heston model which improves the market volatility surface fitting.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.
The type of control was previously available to only large institutions in the often opaque and unregulated over-the-counter volatility swaps market.
More than you ever wanted to know about volatility swaps. The Journal of Derivatives, 6:9-32.
Garch and volatility swaps. Quantitative Finance, 4:589-595.
Summary Statistics for the Profit and Loss of Variance and Volatility Swaps This table reports the summary statistics for two types of forward contracts.
I use VOX to determine the volatility swap rate and the S&P 100 Index's log closing levels to compute the realized volatility.
Similarly, a volatility swap writer selling one contract from January 2, 1986 to end of November 2004 obtains a cumulative profit of $84,529,002.