DEFINITION of 'Volatility Swap'
A forward contract whose underlying is the volatility of a given product.
Next Up
BREAKING DOWN '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.
RELATED TERMS

Historical Volatility  HV
The realized volatility of a financial instrument over a given ... 
Volatility Arbitrage
Trading strategies that attempt to exploit differences between ... 
TimeVarying Volatility
Fluctuations in volatility over time. Volatility is the standard ... 
Volatility
1. A statistical measure of the dispersion of returns for a given ... 
Volatility Quote Trading
A method of quoting option contracts whereby bids and asks are ... 
Implied Volatility  IV
The estimated volatility of a security's price.
Related Articles

Investing
Volatile Stocks: Great, If You Have The Stomach
Volatile stocks can be a lucrative opportunity for shortterm traders. For buyandhold investors, it's a much different story. 
Investing
3 Reasons to Ignore Market Volatility (VIX)
If you can keep your head while those about you are losing theirs, you can make a nice return in roiling markets. 
Trading
Volatility's Impact On Market Returns
Find out how to adjust your portfolio when the market fluctuates to increase your potential return. 
Retirement
Why Low Volatility ETFs Can Serve You Well in Volatile Times
Low volatility ETFs may not make you rich, but they can provide a cushion in volatile times. 
Investing
Roller coaster 2016 for Stocks? Exploring Global Stock Volatility
Find out how much volatility global equity investors are in for during 2016 by seeing how much they've experienced over the past five years. 
Trading
Implied vs. Historical Volatility: The Main Differences
Discover the differences between historical and implied volatility, and how the two metrics can determine whether options sellers or buyers have the advantage. 
Trading
Implied Volatility: Buy Low And Sell High
This value is an essential ingredient in the option pricing recipe. 
Retirement
When Low Volatility Funds Make Sense for Retirees
Low volatility investments let you “smooth out” the market's daytoday or monthtomonth choppy waters. But is a smooth ride the best choice for retirees? 
Trading
The Difference Between Forwards and Futures
Both forward and futures contracts allow investors to buy or sell an asset at a specific time and price. 
Investing
Tips For Investors In Volatile Markets
Find out what to look out for when trading during market instability.
RELATED FAQS

If the stock market is so volatile, why would I want to put my money into it?
In this question, volatility refers to the upward and downward movement of price. The more prices fluctuate, the more volatile ... Read Answer >> 
What is an option's implied volatility and how is it calculated?
Learn what implied volatility is, how it is calculated using the BlackScholes option pricing model and how to use a simple ... Read Answer >> 
How does implied volatility impact the pricing of options?
Learn about two specific volatility types associated with options and how implied volatility can impact the pricing of options. Read Answer >> 
What is the relationship between implied volatility and the volatility skew?
Learn what the relationship is between implied volatility and the volatility skew, and see how implied volatility impacts ... Read Answer >> 
Is volatility a good thing or a bad thing from the investor's point of view, and ...
Learn the basics of volatility in the stock market and how the increased risk provides greater opportunities for profit for ... Read Answer >> 
Why is the Nasdaq more volatile than the NYSE?
Learn about the stocks that are traded on the Nasdaq stock exchange, and discover the Nasdaq's relative volatility level ... Read Answer >>