Volatility Contracts™ — A New Alternative

Abstract

Recent volatility in the financial markets has focused investor interest on alternative investments, which may offer additional means to manage volatility risk or provide return opportunities that are not available in traditional stock and bond markets. The creation of a new alternative volatility contract is proposed, which is designed to be an exchange–tradable instrument similar in many ways to a futures contract. It is based on the realized or actual volatility that the underlying instrument goes on to display.