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Volatility Arbitrage
Volatility arbitrage is a broad term for strategies seeking to exploit perceived differences between the volatility embedded in derivative prices and the volatility a trader expects or attempts to realise through hedging.
Why it matters to you
Despite the word "arbitrage", many volatility arbitrage strategies are not risk free arbitrage. They can depend on: volatility forecasts, hedging, transaction costs, liquidity, model assumptions, and realized market behavior.