In this article, we develop strategies for pricing and hedging options on realised variance and volatility. Our strategies have the following features:
- Readily available inputs. We can use vanilla options as pricing benchmarks and hedging instruments. If variance or volatility swaps are available, we use them as well. We do not need other inputs (such as parameters of the instantaneous volatility dynamics).
- Comprehensive and readily computable outputs. We derive explicit and readily computab