What is the exchange of scattering?
SWAP The dispersion is a financial derivative product designed to allow professional investors to control the risk of portfolio. It can be used to remove risk or collateral or for further risk to speculation. In transactions with scattering, one side is usually live and the other speculator, although it depends on the initial risk position of each side. When the swap agreement is concluded, one party agrees to the purchase of volatility from the other at a fixed price, the Swap strike. The difference in volatility or scattering between a square level of the strike and a square of actual volatility is multiplied by an imaginary amount of swap to determine the payment for the investor. This reduction in theoretical valuation provides the basis for the traded price of this security to tremble and eventually suffer from real, not just netoretical, loss in valuation. Increased volatility can therefore lead to a permanent reduction in the price of financial security. Variance swaps are a sophisticated product focused on extensive portfolio managersrather than small individual investors. They provide cost -effective way of protection of large portfolios from erosion values due to increased volatility. Variance swaps are wholesale, not retail, product.
swaps of scattering are a relatively new product. During this short period, the number and value of swap transactions has grown rapidly. More and more professional portfolio managers are now familiar and appreciate the flexibility that these products offer while driving. They represent an improvement in the former product known as swap volatility.
variants of swaps trade on the idle market rather than on the official exchange. This is largely because they are not standard contracts. Each contract determines a unique set of conditions adapted to the requirements of the original parties. It is difficult for one of these parties to find other parties that are attractive.As a result, there is limited trading in the secondary swap market.
The most common counterparties in the scattering swap are, on the one hand, portfolio administrators are under large asset management institutions and on the other hand, teams of derivatives within the main investment banks and hedge funds. Portfolio managers are usually trying to ensure risk, while investment banks and hedge funds are willing to assume this risk. Portfolio managers consider the swap dispersion to be justified business costs, while investment banks and hedge funds consider this to be an opportunity to ensure speculative profit.
IV are essentially dispersion swaps of analogous insurance contracts. The portfolio administrator decides whether to purchase insurance coverage for the portfolio. Investment banks and hedge funds offer coverage.