- Joined
- 5/12/12
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- 62
- Points
- 18
lets say I have an asset X(t), which is a vol targeted version of the SX5E Index. While I have a vol surface for pricing options for the Eurostoxx,
a. how will the vol surface for X(t) look like ? Will it be a flat surface, given know that irrespective tenor and moneyness my vol will be same as the targeted level ?
b. what happens to the vega in such a case; given its a flat surface, do I end up having no sensitivity to the option price wrt
c. Intuitively, how does the pricing of such options vary from the vanilla options on standard indices
d. how do traders hedge and managed their books with such instruments
a. how will the vol surface for X(t) look like ? Will it be a flat surface, given know that irrespective tenor and moneyness my vol will be same as the targeted level ?
b. what happens to the vega in such a case; given its a flat surface, do I end up having no sensitivity to the option price wrt
c. Intuitively, how does the pricing of such options vary from the vanilla options on standard indices
d. how do traders hedge and managed their books with such instruments