A starting start swap is really a swap swap on future volatility. In another thread, I wrote that Rolloos -Arslan wrote an interesting document on the approximation of prices without a Spot-Start-Volswap model. FVA has nothing to do with Volswaps. This is Forward Volatility Agreement and you enter into a purchase/sale of a vanilla launch option in advance with black scholes settings (except spot price) that were set today. In a very current (fairly condensed) discussion paper, I saw that Rolloos also deducted a price approximation without a model for forward start-up flights: an agreement between a seller and a buyer to exchange a Straddle option at a specific expiry date. On trading day, counterparties determine both expiry date and volatility. On the expiry date, the strike price is set on the straddle on the date of the money on that date. In other words, the prior Volatility Agreement is a futures contract on the realized volatility (implied volatility) of a certain underlying, whether it be equities, stock index, currencies, interest rates, commodities. Etc.

In terms of sensitivity, it is similar to go-start-flight/var swaps because you have no gamma and you have exposure to the front flight. However, it is different that you are exposed to standard vega deformations of the vanilla and MTM options because of the tilt, as the spot moves away from the original trading date. This is used to increase exposure to implied forward volatility and is generally similar to trading with a longer option and cutting your gamma exposure with another option with expiration equal to the start date in advance, constantly balanced, so that you are flat gamma. As I understand it, an FVA is a swap on the volatility of under-induced money in the future, which is ensured by a forward startup/straddle option. Especially as far as FX is concerned, but I think it`s a general question. any good reference would be appreciated. FVA is not mentioned in derman paper (“More than you ever wanted to know about volatility swashes”) Transaction volatility gives investors the ability to hedge the volatility risks associated with a derivative position against unfavourable market movements of the underlying/underlying. It also allows investors to speculate in the future or take a look at volatility levels. Indeed, commercial volatility is greater than Delta coverage, which uses options to cast views on the future direction of volatility. Mathematics in this last document seems right – but I haven`t yet seen any numerical tests of the result without a model. Who tested rolloos` latest result, comments/ideas? Home > Financial Encyclopedia > Derivatives > F > Forward Volatility Agreement I think the idea is that the future ATM IV is a proxy for future volatility.

But the ATM IV, spot or future, is not a good proxy for expected volatility, if there is a significant correlation between the underlying and volatility.