# Variance Swap

*Derivatives & Options — Finicade finance glossary*

A variance swap pays the difference between the volatility an asset actually realises and a level agreed up front — a pure bet on volatility.

A contract that pays the difference between the volatility an asset actually realises and a level agreed up front — a pure, direct bet on volatility with no option-hedging needed. The building block behind the VIX.

**Also known as:** volatility swap

**Related terms:** [Volatility](https://finicade.com/glossary/volatility), [VIX](https://finicade.com/glossary/vix), [Implied Volatility](https://finicade.com/glossary/implied-volatility)

**Taught in:** Quant Quest — Variance Swaps & Volatility Index

Source: https://finicade.com/glossary/variance-swap