Interpreting Variance-Swap Volatility as a Fair Strike

Summary

The discussion explains a possible meaning of the phrase “variance swap volatility.” It interprets the quantity as the volatility level associated with a variance-swap strike that makes the contract have zero value at the relevant time.

This is a concise interpretation rather than a detailed pricing treatment. It does not derive the relationship between variance and volatility, specify contract conventions, or provide market data or examples. Since variance swaps are conventionally quoted in variance units while volatility is expressed as a standard deviation, the precise meaning can depend on the source’s definitions and quotation conventions; the answer is best read as a likely interpretation that should be checked against the surrounding article.

Key ideas

• The phrase may refer to the volatility level that corresponds to a zero-value variance-swap strike.
• The response offers a likely interpretation rather than a formal derivation.
• The source context and quotation conventions should be checked before applying the interpretation.

Tags

# Variance Swap volatility


# Variance Swap volatility












In an article, it is mentioned that a parameter is "the variance swap volatility at time t".

I know what a variance swap is but I don't know what they could mean by "variance swap volatility".

Thanks.

## Answer by Mark Joshi (score 2, accepted)

https://quant.stackexchange.com/a/17054

i would guess the value of volatility that makes the variance swap with strike equal to it have zero value.

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