Asia exotics desks eye forward vol as corridor variance wilts
Forward-starting options offer discounted vol to hedge funds as dealers recycle autocall risk
With demand for one of the primary hedging instruments for Asian exotics desks abating, dealers are turning to an alternative in a bid to reduce risk in their structured products books.
Volumes of so-called corridor variance swaps, which allow dealers to pass to investors large volatility risks built up by their structured products desks, were running at just a third of 2018 levels by the end of the first quarter, according to data from Societe Generale.
Desks are resorting to forward
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