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“The problem is that we’ve not just seen higher volatility but that volatility itself has been very volatile” Abhinandan Deb, Barclays Capital |
Volatility trading has been booming in recent years as hedge funds and a growing number of traditional fund managers have turned to volatility products, particularly variance swaps, for trading opportunities negatively correlated to equity markets. Aite Group, a consultancy, estimates that variance swap trading volume growth could hit more than 100% this year. The product, which trades volatility squared and is particularly useful for mapping the volatility profile that is typical in equity and equity index options, is the fastest-growing segment in the volatility swap product set.
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