CBOE Variance Futures

Quote from atticus:

I am sure that sle will be involved in arbing this product. I am very appreciative for sle's input on "swaps 101" here, and would be interested to hear where you would be bidding or offering any tenor here in a switch market, based upon mids of course.

cboe calculators:

http://cfe.cboe.com/VarianceFuture/VarianceFuture.aspx

http://cfe.cboe.com/VarianceFuture/VarianceFutureDelayedQuote.aspx
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I am sorry, I am a bit behind on the stuff I promised to deliver. Let me first start from the historical quotes (from OTC markets), the I'll get to some R/V plays. As the time goes, I will post some views here, but I am hoping that people will get involved on their own.
 
Quote from sle:

I am sorry, I am a bit behind on the stuff I promised to deliver. Let me first start from the historical quotes (from OTC markets), the I'll get to some R/V plays. As the time goes, I will post some views here, but I am hoping that people will get involved on their own.
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No worries there, you've done enough. I'd just like to see some brief color going forward if you have the time. I've dealt with the OTC product briefly and know the math, but am more interested in your input as practitioner. This is not a supply-constrained mkt where you're essentially bumhunting, as it were, so the maths are of little interest to me (personally).
 
In the calculation of implied and realised variance there is no accounting of jumps (if I am right about this). I suppose it's not siginificant for index but in practice is there any advantage especially for short maturities to use some sort of correction?
 
Quote from kapw7:

In the calculation of implied and realised variance there is no accounting of jumps (if I am right about this). I suppose it's not siginificant for index but in practice is there any advantage especially for short maturities to use some sort of correction?
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Not sure what you mean by "jumps". If you are referring to whether prices are assumed to be continuous.. It's priced off of daily settlement numbers, so underlying prices are always jumping, looks like a step function.
 
Quote from kapw7:
In the calculation of implied and realised variance there is no accounting of jumps (if I am right about this). I suppose it's not siginificant for index but in practice is there any advantage especially for short maturities to use some sort of correction?
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The realized variance includes all daily moves, it's simply a sum of squared log-returns. I assume you are referring to the theoretical price of the variance swaps - the actual swaps usually trade with "var basis" over the theoretical price.
 
Jun 13 is quoted 827.44 sept 13 is 828.94 ..in 2 months time they will quote differently in relation to each other...if implied vols are higher in 2 months would u model a wider difference or inversion ( jun higher than sept)?
 
Quote from sellindexvol66:

Jun 13 is quoted 827.44 sept 13 is 828.94 ..in 2 months time they will quote differently in relation to each other...if implied vols are higher in 2 months would u model a wider difference or inversion ( jun higher than sept)?
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My understanding is that they are not related to each other in that way. Remember these are futures prices, and not the implied volatility number. Thus, 1000 in Jun 13 has nothing to do with 1000 in Sept 13. The June 13 1000 was determined by whatever implied was in June 2012 when it was listed, and similarly for Sep 13.

However, their *moves* should be very closely correlated... and I have to admit I don't understand why the Jun 13 moved up 6 pts yesterday, while the Sep 13 moved up 21. Why would that have happened?
 
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