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Why does a Constant Maturity Swap have a positive vega? Is it because of the convexity? How does one hedge it?

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  • $\begingroup$ (1) Yes. Intuitvely, the convexity correction is a function of $\sigma^2$ and therefore the pricing of CMS swap depends on volatility. (2) With Swaptions. $\endgroup$ – Alex C Jul 2 at 14:51

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