Taking advantage of variance swaps
REAL-LIFE PROBLEMS, INNOVATIVE SOLUTIONS
Background
Forex volatilities – both implied and historical – have been low for the past months, which hampers opportunities in the market. This means that focusing on non-directional strategies, which would also benefit from rising volatilities, seems the most logical choice.
Problem
One could simply buy straddles or strangles, and hedge the delta on a regular basis to maintain a neutral spot exposure. However, this course of action requires numerous spot deals to be done, scattered among the
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