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Table Of Contents

Volatility investing: an old story with some recent innovations
Volatility investing: the traditional way
Defining volatility
Taking vol positions by using straddles/strangles
Taking vol positions by delta-hedging options
The emergence of variance swaps and their valuation
The variance swap mechanism
Pricing: the intuitive approach
Pricing: Carr and Madan’s formal approach
Why not volatility swaps?
Characteristics of volatility
The behavior of variance swap strike prices
Variance swap strike prices as a forecast of future realized volatility
The variance risk premium
Why use variance swaps?
Implied/realized volatility arbitrage
Implied vs. realized volatility arbitrage
Volatility pairs and dispersion trading
Hedging structured products
Immunizing volatility risk of hedge fund strategies
Third-generation volatility products
Gamma swaps
Orderly dispersion trading
Forward-start variance swaps
Corridor variance swaps
Up and down corridor variance swaps
Up and down conditional variance swaps
Riding the smile
Correlation trading
Conclusion
Appendix
Hedging options when volatility is unknown
Valuing gamma swaps
Example of capped variance-swap termsheet
References and further reading
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[BNP Paribas] Volatility Investing Handbook

[BNP Paribas] Volatility Investing Handbook

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Published by financial-engineer

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Categories:Business/Law, Finance
Published by: financial-engineer on Sep 10, 2009
Copyright:Attribution Non-commercial

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09/28/2012

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