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# Tag Info

## Hot answers tagged vega

4 votes

### Purpose of Vega Hedging

Doing away with jargon for a bit, it is wise to hedge every risk factor present in your portfolio. Implied vol is one of them, just like the spot.
• 2,471
1 vote

### Purpose of Vega Hedging

It depends on the strategy. The position seller suffers a lot from vega. He can try to balance the portfolio but it unbalances the delta gamma hedge. It also depends on the time until maturity. If you ...
• 11
1 vote

### Link between Vega and Gamma

I believe in its most fundamental form it is best to internalize that the expected gamma rebalancing P/L = Option price at one volatility. Thus the difference of the option prices at different ...
1 vote
Accepted

### pricing option with two volatility regimes

The implied vol should be the sqrt of realised variance over the option. This is $sqrt(0.5*(20)^2+0.5*(90)^2)$. This is just a result of the fact that for a European option, only the terminal ...
• 2,471
1 vote

### How to compute % return of a strategy with Vega notional

Use the required margin as the notional. You'll have to look up the value based on the exchange.
• 251
1 vote

### Moneyness, implied volatility and option greeks

For the first question: The differences in IV across strikes is largely due to the market having a different view on potential movements than a constant-volatility model (like Black-Scholes) would ...
• 1,441
1 vote

### Vega, square root of time, and ATM straddles

Black Scholes vega is given as $$S \cdot \phi(d1)\cdot\sqrt{\tau}$$ With $\phi$ as $\frac{e^{-x^2}}{\sqrt{2\pi}}$ and d1 as $\frac{ln(\frac{S}{K}) + (r + \frac{\sigma^2}{2})\tau}{\sigma\sqrt{\tau}}$...
• 862
1 vote

### How do we hedge option vega practically?

Just adding my 2 cents. The skill of the role is to collect bid offer on average. Therefore, there will most definitely be times where your positions carry you out and you are forced to lose some or ...
• 598
1 vote

### Purpose of Vega Hedging

No, changes in implied volatility do not affect the PnL at maturity because at maturity his option positions collapse to the terminal payoff [s-k]+, and his futures positions will settle. Vega is only ...
• 862

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