What are Volatility Swaps? Financial Derivatives - Trading Volatility

In todays class we learn about what a volatility swap is.

What is a Volatility Swap?
A volatility swap is a forward contract with a payoff based on the realized volatility of the underlying asset. Volatility swaps settle in cash based on the difference between the realized volatility and the volatility strike.

They are not swaps in the traditional sense, with an exchange of cash flows between counterparties.

At settlement, the payoff is, Notional Amount X (Volatility – Volatility Strike)

[SusieAspen]

I find that with the longer videos that I will watch maybe half of them-- and then have to finish them another time because it can be overwhelming for someone starting out. As I become more familiar with the terminology by listening to more videos, I think it will become easier to stay more focused.

[mikestanmore]

Thankyou Patrick! This explanation is exactly what I've been looking for. (It looks like you've just sold another copy of your book, btw)

[buytenplaetsblog]

this is like math class all over again, but this time it's actually usefull

[johnfoelster]

This is the first time going through this series that I had a question that the video didn't answer.

It's very unclear how the people writing the volatility swaps are making their money if they don't resort to delta hedging. Do they just make an estimate of actual volatility and win or lose the bet if they're wrong? Is there a hedging strategy they pursue?

[jammyak]

Where can I place such a trade right now?

[heynomogo]

Why do you say that the name swap is misleading here ?

[thetendywhisperer]

I dont think this guy blinks. But overall good video

[zahidhossain]

looks like you are just reading some contents from a book :) You can't teach others