Volatility Derivatives
Posted: 4 Jun 2010
Date Written: December 2009
Abstract
Volatility derivatives are a class of derivative securities where the payoff explicitly depends on some measure of the volatility of an underlying asset. Prominent examples of these derivatives include variance swaps and VIX futures and options. We provide an overview of the current market for these derivatives. We also survey the early literature on the subject. Finally, we provide relatively simple proofs of some fundamental results related to variance swaps and volatility swaps.
Suggested Citation: Suggested Citation
Carr, Peter P. and Lee, Roger, Volatility Derivatives (December 2009). Available at SSRN: https://ssrn.com/abstract=1599422 or http://dx.doi.org/10.1146/annurev.financial.050808.114304
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