Thanks, but this article is related to variance swaps and the method of deriving the fair vol you have outlined comes from the static replication of the log contract - you can not do this with volatility swaps. Are you sure on you on the method of combining the historic and fair vol?

Thanks, but this article is related to variance swaps and the method of deriving the fair vol you have outlined comes from the static replication of the log contract - you can not do this with volatility swaps. Are you sure on you on the method of combining the historic and fair vol?

<t>Thanks, can you elaborate on "Forward is derived from the implied volatility curve of the out the money options with expiry equivalent to T, where you weight the vol at 1/Strike^2". I was thinking of calculating this using the convexity adjustment outlined in Gatheral's book. Why is it done like ...

If we assume the swap contract starts at t0, we are at t and it expires at T. With realised I mean sigma_t0t and forward vol I mean sigma_t1T (so the unrealised portion of the swap). So assume that these are both calculated but how do we combine these for a vol swap?

I would like to know if there is a standard way to combine realised and forward volatility in a vol swap contract (not var swap)

<t>Hi all,I'm having difficulty in fully understanding:(i) Why we need to do the barrier adjustment - why can't we simply truncate our replication.(ii) How we do this adjustment - I have looked at papers by Peter Carr on the subject and he seems not to have done any barrier adjustments (if he has pl...