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  • Tuesday, April 29, 2025
  • The Financial Encyclopedia
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Derivatives

  Derivatives   |   Terms
  • 742
  • September 27, 2020
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Volatility Option

A proposed option whose payoff is linked to the magnitude of volatility in a given market. In other words, the underlying asset of this option is a volatility index. The underlying index measures the volatility of the price of an underlying asset, and therefore, it is the underlying of an underlying that determines the payoff of a volatility option.


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