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Forward Volatility Agreement Pdf

By September 21, 2021Uncategorised

In a very recent (quite compressed) working paper, I saw that Rolloos also deduced a model-free pricing approach for Forward Starting Volswaps: I think the underlying idea is that the future ATM IV is a proxy for expected future volatility. However, ATM IV, Spot or Future, is not a good proxy for expected volatility when there is a significant correlation between the underlying and volatility. This option is used to commit to implied volatility in advance and usually resembles trading a longer option and cutting your gamma exposure with another option, whose expiration date matches the departure date in advance, constantly rebalancing yourself, so that you are gamma-flat. Looking at FX in particular, but I think it`s a general question. any good reference would be appreciated. FVA is not mentioned in Derman`s work (“More than you ever wanted to Know about volatility swaps”) The mathematics in this last work looks correct – but I have yet to see numerical tests of the result without a model. Someone tested the latest result of Rolloos, any comment/ideas about it?. . . .