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Derivatives

Citi Preps Conditional Var Swaps

Citigroup will offer conditional variance swaps across regions to hedge funds as the nascent structure is gaining ground.

Citigroup will offer conditional variance swaps across regions to hedge funds as the nascent structure is gaining ground. "Such products are coming to the forefront following the recent moves in volatility globally," said Thomas Gillespie, regional head of derivatives strategy in Sydney. The firm has been pitching the product to clients in Europe, the U.S. and Asia in recent weeks and will shortly begin trading.

Conditional variance swaps record exposure to volatility when the selected underlying reaches a certain condition, such as below or above a strike level, allowing funds to take a view on skew, the difference in implied volatilities of options with the same maturity but different strikes.

The product has begun to take off in recent months with a handful of houses including Goldman Sachs, SG Corporate & Investment Banking and BNP Paribas actively providing pricing (DW, 2/24).

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