Investor C entered into the long position of the following variance swap. If in one year the
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Question:
Investor C entered into the long position of the following variance swap. If in one year the index realized volatility of 18%, what would be the profit or loss?
(Hint: Express the profit or loss in terms of vega notional: P&L / Vega Notional)
Variance Swap | |
Trade Date | May 1, 2020 |
Maturity Date | May 1, 2021 |
Underlying | S&P 500 Index |
Denominated Currency | USD |
Vega Notional | $250,000 |
Strike Price | 22 |
Cap Level | 2.5 x Strike |
Review Later
7.27 vegas
(7.27 vegas)
(3.64 vegas)
3.64 vegas
Related Book For
Foundations of Financial Management
ISBN: 978-0077454432
14th edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
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