Hedging Correlation

darkearth · October 4th, 2007, 8:15 pm

Last august, some of the structured products desks (who are often short correlation) suffered from the market drop (and the raise of the correlation). Could someone tell me what are the means of hedging this in practice ?dark.

darkearth · October 4th, 2007, 8:29 pm

Precision : I was talking about Equity Correlation

doublebarrier2000 · October 20th, 2007, 9:23 pm

hiof course you can enter into a correlation swap, however, it is popular at the moment to use variance swaps.eg. (+/-)1 var swap on an index & (-/+)N variance swaps on the index members (51 for the Eurostoxx)not very clear I apologise