Questions tagged [vega]
The vega tag has no usage guidance.
29
questions with no upvoted or accepted answers
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Greeks of a Basket Option
I want to estimate delta, vega and gamma for a basket option.
This option is a European Call option.
The underlying is $S=\omega_1 S_1 +\omega_2 S_2$
Where:
$S1$ = stock price of asset 1
$S2$ = ...
- 51
4
votes
0
answers
248
views
Can the vega of ITM call-options be negative when the distribution of the underlyings returns is negatively skewed?
While calculating european call option prices, using the variance-gamma model formula provided by Madan, Carr & Chang (1998), I noticed that, holding all other things constant, the value of an ITM ...
- 445
4
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120
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Spread in Option Quotes
Let's take a look at market-maker's option quote in vol terms: 8.5 / 9.5. In that example bid-ask spread equals 1.0 point of vol.
Can anybody clarifying how market-maker choose amount of spread in ...
- 41
3
votes
0
answers
220
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CMS cap has more vega exposure than CMS floor for same strike
When I priced a 10y expiry single look CMS30 ATMF CAP, I noticed that the vega exposure is higher than that of the same 10y expiry single look CMS30 ATMF FLOOR. Why is that?
I have a suspicion that it ...
- 31
3
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0
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166
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Spread vol for interest rate spread options in normal environment
Suppose I am long spread option with underlying : rate A - rate B. The vega on the option would be positive. But if I want to compute the option vega with respect to individual rates, can I use the ...
- 45
3
votes
0
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265
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Usages of variance swap
I’m interested in variance swap.
Considered from its feature, variance swap is used for betting the (historical) volatility of underlying asset.
If we use it for hedge tool of Vega or Volga, does it ...
- 31
3
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0
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1k
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Derivation of the Pnl of a Delta Hedged Straddle and Risk Reversal
In the link below, in the text it states the following equations:
Delta-hedged straddle P&L = Volatility Risk-premium
×|
Straddle Vega
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and
Delta-hedged risk-reversal P&L:
...
- 2,562
2
votes
0
answers
82
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Local volatility from stochastic volatility: implications for hedging
This is something I've been wondering about:
Given a stochastic volatility model with (stochastic) spot variance $\sigma^2_t$, according to Gyöngy's theorem there exists a local volatility $\sigma^2(K,...
- 2,153
2
votes
0
answers
118
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Risk-managing vanilla books (sell-side)
I am interested in learning more about how traders risk-manage books of vanilla options. I presume there should be a fairly standard list of facts. For the moment, the area of interest is FX, as ...
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2
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0
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263
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Vega for long long-term ATM call and short short-term ATM call
You are long a long-term ATM call and short a short-term ATM call. The
ratio is adjusted to make the total vega zero. If before expiry of the
short-term option, spot is again at the strike price. ...
- 519
2
votes
1
answer
581
views
Under what circumstances Veta is positive?
In general, as the option moves towards expiry, its vega is decreasing. Are there circumstances where the veta, i.e. the sensitivity of vega with respect to time, is positive, that is when vega is ...
- 1,896
1
vote
0
answers
67
views
Time Weighted Vega of Options
What is the correct way to calculate Time weighted vega for options?
From searching in Google, saw this reference: http://www.topquants.nl/wordpress/wp-content/uploads/2015/01/Van-Gulik-Risk-...
- 939
1
vote
0
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118
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Vega for ITM and OTM options against the ATM one
In Dynamic Hedging by Taleb, at pag. 182, is presented the concept of "Vega ratio". If I understand correctly, the author in Table 10.3 confronts the Vega of an OTM option with the one of an ...
- 241
1
vote
0
answers
486
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Practical risk management on snowball autocallable portfolios
I am new to exotic options pricing and risk management. The scenario that I encounter is that the market maker sells snowball autocallable products(accumulated coupon) every trading day and has to ...
- 31
1
vote
0
answers
211
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How could option vega be remapped on reduced volatility surface?
try to be clear to ask my question:
Suppose the original vol surface is a n by m matrix where n is the number of pillars in the volatility term structure and m is the number of strikes. According to ...
- 9
1
vote
0
answers
84
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Volatility spread of Strangle
It's written in a book by Giles Hewitt : " The bid-offer spread quoted on a Strangle in volatility terms will usually be wider than the ATM spread to the same maturity because strikes away from the ...
- 595
1
vote
0
answers
87
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Variance swap correlation trade
I found two highly correlated assets that have spread in 3M realized and implied vol at historical minimum. To go long on this spread I thought of using two variance swaps.
Would it be cheaper to ...
- 11
1
vote
0
answers
973
views
Time weighted Vega for a VIX future contract
How to calculate the time weighted Vega applicable for a 3 month future contract (Expiring in 82 days)? Vega with S&P500 as base
- 11
1
vote
0
answers
722
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How accurate are Black-Scholes estimates of Vega, Volga, Vanna
Wikipedia provides analytical formulas for calculating Greeks. I can get Delta, Gamma, Theta all from Bloomberg. I need Vega, Volga, Vanna for my research. Should I use these analytical formulas for ...
- 131
1
vote
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72
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Does it make sense to calculate an option price in future (at t+1)?
Often I ask myself whether it makes sense to calculate the price of a Call at t+1 supposing for example that underlying asset does no move i.e. $S_{t+1} = S_{t}$ ...
1
vote
0
answers
750
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What is the vega profile of an up-and-out call option? And why is this important in structuring?
I had this question during an interview but I can't seem to find the answer on the internet.
- 21
1
vote
0
answers
1k
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Vega binary option VS Vega Call option
I don't understand why the vega of a call option is not 0 when ATM. Irrespective of the implied volatility the vega of a binary call option when at-the-money is always zero, since you have 50-50 ...
- 11
1
vote
0
answers
489
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Variance Swap Vega
I am currently reading the paper of Derman and al for my master thesis on Variance Swap.
At one point one says that "The variance vega is largest when the option is ATM", considering here a call ...
- 69
1
vote
0
answers
112
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Hedge volatility decreases
My particular options positions are typically a long delta, and long vega. Decreases in implied volatility, or specifically the VIX, can drastically alter the profitability of my position.
Is there a ...
- 1,872
0
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0
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38
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Vega of forward volatility
Imagine I have two European-style options that are the same except for their times to expiry: $T_1 \lt T_2$. And each option has its own vega $\mathcal{V}_1$ and $\mathcal{V}_2$. My question is: what ...
- 138
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0
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233
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How to compute Vega in the Heston Model
I am computing European Option Sensitivity as: Delta, Vega and Gamma. I am using Heston Model to simulation spot and the variance.
While computing Delta and Gamma, I understand, we need to bump spot ...
- 1
0
votes
0
answers
959
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Gamma, Theta, Vega, Vanna and Volga PnL under Bachelier
Is there a PDE that decomposes the daily PnL as delta, gamma, vega vanna and volga but under Bachelier model (assuming normal vol) ?
0
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0
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530
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Option Vega for a portfolio of Options
I am given a list of Options positions consisting of various combinations of Underlying and ...
- 377
0
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0
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362
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Higher Vega with ATM options when Spot is higher
Which would have larger vega, an ATM call option at spot 100 or an ATM call option at spot 200.
Apparently the answer is the one with ATM at spot 200. I am not sure how you get this answer. Why ...
- 2,562