A volatility swap is
A) An instrument that swaps the change in the value of a market variable for a fixed amount
B) A swap involving an asset whose volatility is greater than a certain level
C) An exchange of the implied volatility of an option at a future time for a fixed volatility
D) An exchange of the realized volatility of an asset for a fixed volatility

Question

Quizplus · Accepted Answer

A volatility swap is an exchange of the realized volatility of an asset over a period of time for a prespecified fixed volatility with both being multiplied by a notional principal.

A Volatility Swap Is