# Tag Info

Accepted

### Is variance swap long volatility of volatility?

My two cents: Let's agree that a derivative is long an underlying if the payoff of the derivative increases with the price of the underlying $S$. Then buying a variance swap is going long the ...
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### Is variance swap long volatility of volatility?

What about the following argument: a variance swap can be replicated with a portfolio of vanilla options, nearly all of which are out of the money (OTM) . But it is well known that OTM options are ...
• 17k
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### Market price versus theoretical price of varswaps

The well-known formula expressing the price of a variance swap as a function of an (infinite) strip of European options is actually not that model-free: it assumes that the price process follows a ...
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### Variance Swaps for IR products

In this month's Risk magazine, there was a research paper stating precisely There is no liquidity in the variance swaps of interest rates.
• 2,680
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• 8,739

### Is variance swap long volatility of volatility?

Since the variance swap is linear in variance. Its local volatility exposure is 2σ, with second derivative = 2. If one was to hedge this local volatility exposure using options or a volatility swap, ...
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### Volatility swaps hedging

Although this question seems Taylor-made for me, I shall resist promoting my own work and refer you instead to Carr and Lee's seminal paper Robust replication of volatility derivatives. Basically what ...
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### Calculating PnL of Options strategies with Volatility Surface

The function that converts option prices and implied vols is bijective. So yes, you can compute the PnL given you have the volatility surface and you know the parameters that where used in its ...
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### Impact of stochastic rates on varswaps and volswaps

I can't post this as a comment yet (not enough reputation), but for the impact of stoch rates on varswaps you can take a look at his: Horfelt & Torne, The value of a variance swap - a question of ...
• 46
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### A lower bound for variance swap strike

It is indeed perfectly correct under your working assumptions. This is actually what Gatheral also notes in his book 'The Volatility Surface: A Practioner's Guide' (Chapter 11 on Variance Swaps, pages ...
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