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Financial Instruments to Capture Fraud Induced Volatility

In: Shorting Fraud

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  • Jesper Sørensen

Abstract

This chapter explores how to capitalize on the volatility resulting from exposing corporate fraud. It outlines strategies, where investors profit from significant price swings in either direction. The chapter also introduces variance and volatility swaps, which are bets on the future volatility of the underlying asset. Additionally, it explains calendar spreads, where investors can profit from increased market volatility following the release of a fraud report. Finally, the chapter touches on the potential spillover effects of fraud exposure on broader volatility instruments. These strategies offer investors diverse ways to potentially profit from the market’s reaction to corporate fraud revelations.

Suggested Citation

  • Jesper Sørensen, 2025. "Financial Instruments to Capture Fraud Induced Volatility," Springer Books, in: Shorting Fraud, chapter 0, pages 327-332, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-81834-9_32
    DOI: 10.1007/978-3-031-81834-9_32
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