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Username: Maria Rating:  Asked to: Dara Madee Date Created: 24 Jan 2017 |
| Category | 28 |
| Tag | Financial |
| Question | Please give the definition of 'Variance Swap'. |
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Hi Maria, A type of volatility swap where the payout is linear to variance rather than volatility. Therefore, the payout will rise at a higher rate than volatility. Variance is the square of standard deviation. Because of this, a variance swaps' payout will be larger than that of a volatility swap, as these products are based upon variance rather than standard deviation. |
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