Volatility derivatives

Abstract

Before getting into the details of all the exotic derivatives based on volatility asset as such, it is imperative to get the whole concept of this term of volatility and how the Volatility Index concept is created. The flow of this discussion would begin with the option pricing model of Black-Scholes. We would briefly introduce the facets of this model and also some of the important parameters which would be later used to build upon the volatility concept and also its application in form of Variance Swap