Volatility Derivatives

Peter Carr and Roger Lee ()
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Roger Lee: Bloomberg/NYU, New York, NY 10022

Annual Review of Financial Economics, 2009, vol. 1, issue 1, 319-339

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.

Keywords: variance swap; volatility swap; realized variance; realized volatility; implied volatility (search for similar items in EconPapers)
JEL-codes: G12 G13 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (75)

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