Huge Premium for Equity Market Variance Swaps?
October 25, 2011 - Volatility Effects
Is selling insurance against stock market volatility reliably profitable? In the December 2010 version of his paper entitled “Variance Trading and Market Price of Variance Risk”, Oleg Bondarenko examines payoffs from synthesized variance swap contracts, derived from the difference between realized and contract-specified variances over a given interval, during a 20-years period. He constructs the hypothetical swap contracts… Keep Reading