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Volatility Swap
Volatility swap is a forward contract on future realized volatility of a given security.
Volatility swaps allow investor to trade volatility of a security or any other asset directly, disregarding other factors like price, expiration date etc. Investors often used very liquid financial instruments as underlying assets, like FX, but not necessarily.
As well as variance swaps, volatility swaps provide exposure to pure volatility of underlying price, with nonlinear payoffs.
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