A variance swap is an option on the realized variance of a stock's return over a defined period of time. A variance swap may be replicated using
A) A static position in forwards and options on the stock.
B) A static position in stock, forwards and options.
C) A dynamic position in forwards and options on the stock.
D) None of the above

Question

Quizplus · Accepted Answer

A variance swap may be replicated using a static position in forwards and options on the stock.

A Variance Swap Is an Option on the Realized Variance