10 VARIANCE PRODUCT ARCHITECTURE

10.1 Variance Swap Scope

The Equity Derivative Working Group has extended the FpML 4.2 standard to cover Variance Swap

10.2 Overall Architecture

Variance Swap is modelled as a single netted leg.

images/variance-swaps/ClassHierarchy.gif

these components provide support for:

10.2.1 varianceSwap

A Variance Swap modelled using a single netted leg.

images/variance-swaps/varianceSwap.jpg

  • productType - A classification of the type of product. FpML defines a simple product categorization using a coding scheme.
  • productId - A product reference identifier allocated by a party. FpML does not define the domain values associated with this element. Note that the domain values for this element are not strictly an enumerated list..
  • additionalPayment - Specifies additional payment(s) between the principal parties to the netted swap.
  • extraordinaryEvents - Where the underlying is shares, defines market events affecting the issuer of those shares that may require the terms of the transaction to be adjusted.
  • varianceLeg

10.2.2 VarianceLeg

VarianceLeg - A type describing return which is driven by a Variance calculation.

images/variance-swaps/VarianceLeg.jpg

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