Variance Swap

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DEFINITION of 'Variance Swap'

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

INVESTOPEDIA EXPLAINS 'Variance Swap'

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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    Risk-weighted assets are the denominator in the calculation to determine the solvency ratio under the provisions of the Basel ... Read Full Answer >>
  3. How is fair value calculated in the futures market?

    The fair value is the theoretical calculation of how a futures stock index contract should be valued considering the current ... Read Full Answer >>
  4. What are the major types of insurance policies that insurance companies will offer?

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  5. How does an entrepreneur choose a business structure?

    Swaps are derivative contracts between two parties that involve the exchange of cash flows. Interest rate swaps involve exchanging ... Read Full Answer >>
  6. When was the first swap agreement and why were swaps created?

    Swap agreements originated from agreements created in Great Britain in the 1970s to circumvent foreign exchange controls ... Read Full Answer >>
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