A correlation swap is a type of exotic derivative security that pays off the observed statistical correlation between the returns of several underlying assets, against a preagreed price. 

At the time of writting, it is traded OTC on equity and FX derivatives markets. 

This part focuses on equity correlation swaps, which appeared in the early 2000s, as a means to hedge the parametric risk exposure of exotic trading desks to changes in correlation. 



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