The ups and downs

Sophisticated hedge funds and proprietary trading desks have piled into exotic variance products in the past 18 months. Radi Khasawneh looks at how these products work, and what the recent heightened volatility has meant to this market

risk-1007-30-gif

Significant unwinding activity has been apparent among sophisticated hedge funds active in exotic varieties of variance swaps in recent weeks.

Conditional variance products, for instance, have proved popular, as they allow hedge funds and prop desks to express a view on the direction of volatility more cheaply than with a standard variance swap.

As with standard variance swaps, conditional variance swaps have a payout equal to the difference between realised variance and a pre-agreed strike level

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 info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

What gold's rise means for rates, equities

It has been several years since we have seen volatility in gold. An increase in gold volatility can typically be associated with a change in sentiment and investor behavior. The precious metal has surged this year on increased demand for safe haven…

Most read articles loading...

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