VOLATILITY DERIVATIVES AND MODEL-FREE IMPLIED LEVERAGE

@article{Fukasawa2014VOLATILITYDA,
  title={VOLATILITY DERIVATIVES AND MODEL-FREE IMPLIED LEVERAGE},
  author={Masaaki Fukasawa},
  journal={International Journal of Theoretical and Applied Finance},
  year={2014},
  volume={17},
  pages={1450002}
}
  • M. Fukasawa
  • Published 17 March 2014
  • Economics
  • International Journal of Theoretical and Applied Finance
We revisit robust replication theory of volatility derivatives and introduce a broader class which may be considered as the second generation of volatility derivatives. One of them is a swap contract on the quadratic covariation between an asset price and the model-free implied variance (MFIV) of the asset. It can be replicated in a model-free manner and its fair strike may be interpreted as a model-free measure for the covariance of the asset price and the realized variance. The fair strike is… 

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