{
  "url": "https://openlegislation.uk/eu-regulation-2013-231/annex-II/division-3",
  "json_url": "https://openlegislation.uk/eu-regulation-2013-231/annex-II/division-3.json",
  "legislation": "eur/2013/231",
  "legislation_title": "Commission Delegated Regulation (EU) No 231/2013 of 19 December 2012 supplementing Directive 2011/61/EU of the European Parliament and of the Council with regard to exemptions, general operating conditions, depositaries, leverage, transparency and supervision (Text with EEA relevance)",
  "legislation_url": "https://openlegislation.uk/eu-regulation-2013-231",
  "path": "annex/II/division/3",
  "kind": "division",
  "number": "3",
  "heading": "List of examples of non-standard derivatives with the related commitment methodology being used:",
  "text": "Variance swaps: Variance swaps are contracts that allow investors to gain exposure to the variance (squared volatility) of an underlying asset and, in particular, to trade future realised (or historical) volatility against current implied volatility. According to market practice, the strike and the variance notional are expressed in terms of volatility. For the variance notional, this gives:\nvariance notional = vega notional 2 × strike The vega notional provides a theoretical measure of the profit or loss resulting from a 1 % change in volatility.\nAs realised volatility cannot be less than zero, a long swap position has a known maximum loss. The maximum loss on a short swap is often limited by the inclusion of a cap on volatility. However without a cap, a short swap’s potential losses are unlimited.\nThe conversion methodology to be used for a given contract at time t is:\nVariance notional * (current) variancet (without volatility cap)\nVariance notional * min [(current) variancet volatility cap2] (with volatility cap)\nwhereby: (current) variancet is a function of the squared realised and implied volatility, more precisely:\n(current) variance t = t T × realized volatility (0,t) 2 + T − t T × implied volatility (t,T) 2\nVolatility swaps\nBy analogy with the variance swaps, the following conversion formulae should be applied to volatility swaps:\nVega notional * (current) volatilityt (without volatility cap)\nVega notional * min [(current) volatilityt; volatility cap] (with volatility cap)\nwhereby the (current) volatility t is a function of the realised and implied volatility.",
  "extent": "E+W+S+N.I.",
  "status": null,
  "version": "current",
  "annotations": [],
  "outstanding_effects": [],
  "provenance": {
    "source": "legislation.gov.uk",
    "source_url": "https://www.legislation.gov.uk/eur/2013/231/annex/II/division/3",
    "retrieved_at": "2026-11-01T14:48:47.465765+00:00"
  },
  "licence": "Open Government Licence v3.0",
  "licence_url": "https://www.nationalarchives.gov.uk/doc/open-government-licence/version/3/",
  "attribution": "Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives."
}