Variance Swap Replication: Discrete or Continuous?

Fabien Le Floch

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The popular replication formula to price variance swaps assumes continuity of traded option strikes. In practice, however, there is only a discrete set of option strikes traded on the market. We present here different discrete replication strategies and explain why the continuous replication price is more relevant.
Original languageEnglish
Article number11
Pages (from-to)1-15
Number of pages15
JournalJournal of Risk and Financial Management
Issue number1
Publication statusPublished - 2018


  • variance swap
  • volatility
  • derivatives
  • quantitative finance
  • OA-Fund TU Delft


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