3
votes
Vega hedge of a barrier option
Too long for a comment. I find Bergomi's sentence vague, so here follows an equally imprecise attempt at an answer.
A claim that can be statically replicated in a model-free manner is in fact immune ...
- 1,739
2
votes
Gamma and Theta of a swaption
In the normal model framework $\Theta=-\Gamma\sigma^2/2$ is indeed a good theoretical rule-of-thumb. However, you're ignoring the impact of the roll-down of your underlying 1y1y fwd swap in this theta ...
- 1,231
1
vote
Delta-Gamma neutral vs Delta-Vega neutral
For a flat IV skew (not surface), the gamma neutral portfolio == the vega neutral portfolio. This is because Vega = s^2 * σ * T * gamma, so when the net gamma exposure is 0, the net vega exposure is 0,...
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