1. Read the quote carefully and describe how you would take this position using volatility swaps. Be...

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1. Read the quote carefully and describe how you would take this position using volatility swaps. Be precise about the parameters of these swaps.

a. How would you price this position? What does pricing mean in this context anyway?

Which price are we trying to determine and write in the contract?

b. In particular, do you need the correlations between the two markets?

c. Do you need to know the smile before you sell the position?

d. Discuss the risks involved in this volatility position.

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Principles Of Financial Engineering

ISBN: 9780123869685

3rd Edition

Authors: Robert Kosowski, Salih N. Neftci

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Question Posted: Oct 26, 2024 05:00 AM

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1. Read the quote carefully and describe how you would take this position using volatility swaps. Be...

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Principles Of Financial Engineering

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