Click on menu to the left for the subpages with numbers, notes and comments on derivatives and structured products. NOTE: you will notice the numbers have not been updated for a while - sorry, but we are snowed under with work.
We don't normally have time to publish, but were recently invited to contribute a paper to Automated Trader magazine
You can download the PDF (not for commercial-replication) and the spreadsheets with the calculations and examples in the web-folder available to EQF standard members: if needed register (it's quick and free) then go to My Account (link top right).
Title: Trading realised variance using listed vanillas
Technical Abstract:We define a family of generalized measures of realized variance which may be captured by combining a portfolio of listed options with a model-independent trading strategy on the futures, leading to time-independent formulas for deltas simpler than Black-Scholes. We quantify sources of error, and remark on practicalities, trading frequency, and extensions. Among the examples discussed are normal variance, corridor variance, and also the `frequency swap' which only requires a pure delta strategy.