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What are the commonly used methods to compare the cost of volga/vanna in credit index options across time and strikes? In practice, is the Vanna-Volga exposure technique used in credit, or are there nuances which make it unsuitable?

TLDR: the end-goal is to be able to assess the richness or cheapness of skew, volga and convexity in credit index options similar to in other asset classes.

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  • $\begingroup$ Do credit index swaptions really have material volga or vanna? $\endgroup$
    – Dimitri Vulis
    Feb 7, 2021 at 20:07
  • $\begingroup$ Interesting point that I hadn’t considered. Intuitively, there should be a decent amount of vanna because there is smile, but as for volga, I suppose there may not be when you consider how convex the underlying instrument (CDX) is? $\endgroup$
    – CreditNecromancer
    Feb 7, 2021 at 21:09
  • $\begingroup$ Not familiar with credit index options, but if the index is not a process with deterministic vola, and I am sure it isn't, why wouldn't vanna and volga be material enough to consider. $\endgroup$
    – user34971
    Feb 7, 2021 at 23:06

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