A variance swap is a financial derivative that allows one to speculate on or hedge risks associated with the magnitude of movement, i.e. volatility, of some underlying product, like an exchange rate, interest rate, or stock index. A Variance Swap is a type of volatility swap where the payout is linear to variance rather than volatility. Therefore, the payout will rise at a … [Read more...]
Variance Swap [Explained]
A variance swap is a useful tool while investing. It is a financial derivative which allows one to speculate on or hedge risks associated with the magnitude of volatility, of some underlying product, like an exchange rate, interest rate, or stock index. One aspect of the swap will pay an amount based upon the realized variance of the price changes of the underlying product. … [Read more...]