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2) you only take trading days for your analysis because taking in account days on which no price changes took place would shift results in a wrong direction. For exmple, you mostly take 250 trading days p.a. 3) Your time interval up to 2007 is okay and excludes the financial crisis, which is a non-normal circumstance. Therefore, your time interval can be ...


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I think what you are missing is simply the Vega-Gamma relation in the Black-Scholes model. Namely: $$ Vega = \frac{\partial v}{\partial \sigma} = \sigma(T-t)S^2 \frac{\partial^2 v}{\partial S^2} = \sigma \tau S^2 \Gamma $$ Plugging this into your coverage error, you get its expression in terms of the Vega which is the most natural measurement of your ...



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