[R-SIG-Finance] [R-sig-finance] Volatility Swaps

[Val Neyman]

I think you need a little more than that since an existing volatility swap
would need the current realized vol since effective date and the implied vol
until expiry. So something like this: vol(t,t_ef-t_ex) = RV(t-t_ef) +
IV(t_ex - t). Where t_e is the effective date of the vol swap, t_ex is the
expiration of the swap, IV is the implied vol, and RV is the realized vol.
The MV of the vol swap at t (where t>=t_ef) would be
PV(Notional*(vol(t_ef,t_ef-t_ex) - vol(t,t_ef-t_ex))). On t_ef, the value of
the swap = 0.

Any ideas on how to implement this would be appreciated. Thanks.


Luwingo wrote:
> 
> Hi Val- Not at present (to my knowledge), but it's not very hard to write
> one. Volatility swaps are after all just cashflow swaps, and those aren't
> hard to value even in a spreadsheet. You will basically need a volatility
> curve and a risk-free spot curve for discounting; after that, it's all
> just a PV calculation.
> 
> 
> Val Neyman wrote:
>> 
>> Does anyone know if there are any functions to price volatility swaps in
>> Rmetrics? Thanks.
>> 
> 
> 

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