Volatility as an Asset Class

A guide to buying, selling and trading third generation volatility products

Publication Date	July 2007
Publisher	Risk Books
Product Type	Book
Pages	328
ISBN Number	9781904339717
Product Code	RIS00372

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£99.00
approximately: $175 | €126

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Summary

The most notable recent change is the opportunity to trade volatility; there are now volatility, corridor and covariance swaps, as well as gamma and correlation trades available. The market for these contracts is expected to grow exponentially over the next few years. In fact it is quite possible that they will grow almost as quickly as the credit derivatives market, which means that the market desperately needs such a comprehensive reference guide.

Written from the practitioner's perspective, but with important academic contributions, this book is wholly devoted to the trading of volatility as an asset class. This new guide covers:

Trading of volatility and related issues (eg, measurement, forecasting, modelling and hedging)
3rd generation volatility products including volatility, variance, gamma and correlation swaps
How volatility can be measured, what it means, and how it can be used
Reviews the market and compares volatility and fixed income asset classes
Shows how to build volatility surfaces
Examines the reliability of the VIX and describes the VIX and other CBOE-traded volatility products
Pricing and hedging variance swaps
Trend following in terms of a volatility strategy
How the models are calibrated to the market.

This book is recommended reading for traders, risk managers, hedge fund managers, front-, middle- and back-office personnel and software designers, or anyone looking to take advantage of this growth market.

Content

Introduction
Israel Nelken
Super Computer Consulting, Inc
Section 1: Novel Uses of Volatility, in A Traditional Framework
- 1 Building Implied Volatility Surfaces from the Available Market Quotes: A Unified Approach
  - Antonio Castagna; Fabio Mercurio
  - Banca Profilo; Banca IMI
- 2 Shedding Light on Alternative Beta: A Volatility and Fixed Income Asset Class Comparison
  - David E. Kuenzi
  - Glenwood Capital Investments, LLC
- 3 Trend following as a Long Volatility Strategy
  - Patrick Kremer; Hari P. Krishnan; Marc Malek
  - Conquest Capital Group LLC; Heptagon Capital; Conquest Capital Group LLC
- 4 Basket Volatility and Correlation
  - Matthias R. Fengler, Kay F. Pilz, Peter Schwendner
  - Sal. Oppenheim Jr & Cie. Frankfurt am Main, Germany
- 5 Rethinking Volatility in the Era of Markov Processes, Fractal Geometry and Guided Random Walks
  - Peter Krause
  - Krause Financial Systems
Section 2: The Vix
- 6 Construction and Interpretation of Model-free Implied Volatility
  - Torben G. Andersen; Oleg Bondarenko
  - Kellogg School of Management, IL; University of Illinois at Chicago, IL
Section 3: New Products Related to Trading Volatility
- 7 Second-Generation Volatility Products
  - Nicolas Mougeot
  - Deutsche Bank
- 8 Exchange-Traded Volatility: CBOE and CFE VIX and Variance Derivatives
  - John Hiatt, Catherine Shalen
  - CBOE
- 9 Investment Strategies Using the Volatility Index (case study of the Korean market)
  - Chul Min Kim
  - Hyundai Securities
- 10 Risk Premium, Pricing and Hedging for Variance Swaps
  - Srdjan D. Stojanovic
  - University of Cincinnati
- 11 Corridor Variance Swaps
  - Peter Carr; Keith Lewis
  - Bloomberg/NYU; KALX, LLC