Volatility Swap

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DEFINITION of 'Volatility Swap'

A forward contract whose underlying is the volatility of a given product.

INVESTOPEDIA EXPLAINS 'Volatility Swap'

This is a pure volatility instrument allowing investors to speculate solely upon the movement of a stock's volatility without the influence of its price. Thus, just like investors trying to speculate on the prices of stocks, by using this instrument investors are able to speculate on how volatile the stock will be.

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  2. How do I calculate a forward rate in Excel?

    You need to have the zero-coupon yield curve information to calculate forward rates, even in Microsoft Excel. Once the spot ... 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?

    The principal commodities used in producing chemicals are oil, natural gas, coal and a wide variety of metals and minerals. ... Read Full Answer >>
  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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