Branger, Nicole; Schlag, Christian - Universität <Münster, Westfalen> / Lehrstuhl für … - 2005
Variance contracts permit the trading of ’variance risk’, i.e. the risk that the realizedvariance of stock returns changes randomly over time. We discuss why investorsmight want to trade this type of risk, and why they might prefer a variance contractto standard calls and puts for this...