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Volatility swap is a forward contract with payments basing on realized volatility. The cash in such cases is settled based on the difference between the realized volatility and volatility strike.

 

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Adverse selection is a situation when either seller or a buyer has a piece of information that the other party doesn’t have. The information in this case usually refers to the quality of the product in question.

 

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Outside broker can refer to several things:

1. Broker who deals outside of the major exchange and deals with major securities.

2. A broker who deals with securities which aren’t traded in the exchange where he works.

 

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