VIX and VARIANCE

njg1527 · July 30th, 2007, 2:16 pm

Does anyone have information on hedging Variance swaps with VIX options? Any help would be much appreciated.Thanks

McKinnell · August 3rd, 2007, 9:24 am

VIX is the 1 month variance swap strike on the S&P 500 Index

Alzone · August 6th, 2007, 2:39 am

seeing as the front month VIX is the only really liquid month then I guess that means its not the best variance swap hedge as var swaps are generally longer dated...?

Donp456 · August 21st, 2007, 6:58 pm

I need a VIX or SPX guy? Know of any?

Donp456 · August 21st, 2007, 6:59 pm

I need a VIX/ SPX index trader, know of any?

njg1527 · August 21st, 2007, 7:01 pm

what are the details?

GammaSkimmer · August 21st, 2007, 7:43 pm

VIX is NOT a once month variance swap son the S&P. VIX is priced off of a composite to create a 30 day implied variance. The terminal value is a rolling form of this and has no derivation (directly) from realized.

Thinker · August 21st, 2007, 10:51 pm

And the tradable instrument is the futures contract (unless you want to try and replicate the short dated options used in the index calculation). The huge volatility in this short dated contract (just look at the last two to three weeks) makes it a poor hedge for the more usual (6/12/24 months) variance swaps that tend to be traded OTC. In some sense it can be used as a hedge for portfolios.