# 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} }

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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