Currency Variance Swap Payout Calculator
Calculate payouts for currency variance swaps based on realized vs implied volatility
About this calculator
A Currency Variance Swap Payout Calculator helps traders and financial professionals determine profit or loss on variance swap positions by comparing realized currency volatility against implied volatility at trade inception. This sophisticated derivative instrument allows investors to trade pure volatility without directional exposure to exchange rates. The calculator is essential for risk management, pricing validation, and settlement calculations in foreign exchange volatility trading strategies.
How to use
Enter the notional amount, strike volatility (implied volatility at inception), and realized volatility over the swap period. Input the variance swap rate and settlement period. The calculator will compute the payout amount, showing whether the position generated profit or loss based on the volatility differential.
Frequently asked questions
What is a currency variance swap?
A derivative contract that exchanges realized currency volatility for a predetermined strike volatility, allowing pure volatility trading without directional FX exposure.
How is the payout calculated?
Payout equals notional amount multiplied by the difference between realized variance and strike variance, typically annualized and adjusted for the settlement period.
What's the difference between volatility and variance swaps?
Variance swaps trade variance (volatility squared) while volatility swaps trade volatility directly, with variance swaps being more liquid and standardized.