10.1 Variance Derivatives Scope
The Equity Derivative Working Group extended FpML to cover:
- Variance Swaps, a type of volatility swap where the payout is linear to variance rather than volatility, therefore the payout will rise at a higher rate than volatility;
- Short Form Variance Options represented also as Transaction Supplements under ISDA Master Confirmation Agreements.
Variance Swaps and Options are modelled using the following product element in FpML:
- varianceSwapTransactionSupplement
- varianceOptionTransactionSupplement
Please note that the following documentation describes the full, confirmation-view representation of variance swaps. In Transparency view, some of the fields mentioned below are not available. Please consult the schema reference for more precise documentation.
these components provide support for:
varianceSwapTransactionSupplement specifies the structure of a variance swap transaction supplement. This modelled using the same variance legs as Variance Swap, but does not allow for long form content such as extraordinary events.
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varianceLeg - A type describing return which is driven by a Variance calculation.
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varianceOptionTransactionSupplement specifies the structure of a variance option transaction supplement. VarianceOptionTransactionSupplement implements Variance Option Transaction Supplement by providing a short form representation for use in trades governed by a Master Confirmation Agreement.
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