Merrill to launch options on vol swaps

New angles

Undaunted by the risks associated with managing an equity volatility swap book, Merrill Lynch will soon launch a product that will be even more challenging to risk manage: options on volatility swaps.

“We will soon offer clients options on realised equity index volatility, and options on realised equity index variance,” says Zhenyu Duanmu, a New York-based equity derivatives trader at Merrill Lynch.

Whereas other dealers have offered clients option-like products on a piecemeal basis, Merrill’s