An easy-to-hedge covariance swap

An easy-to-hedge covariance swap

team-of-toy-figures-putting-a-final-jigsaw-piece-into-place

Since the seminal papers by Neuberger (1990) and Dupire (1993), contracts on volatility and correlation have been of increasing interest. Volatility and correlation products are actively traded on exchanges and over-the-counter. In particular, contracts that pay the realised variance of the log returns of the underlying asset have become a popular product. Part of the reason for their popularity is that they can be perfectly hedged with a static portfolio of European-style call and put options

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact [email protected] to find out more.

To continue reading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: