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A Primer on Vega Risk Measurement in RiskManager
Jan 1, 2010
A primer on vega risk
measurement in RiskManager
Vega risk measurement is a new feature of RiskManager. Accurate vega risk measurement depends on both implied volatility data and the measurement algorithm. This article discusses our approach to vega risk measurement, reviewing both the data inputs and the methodology, with illustrations drawn from the foreign exchange markets. We present and interpret sample value-at-risk reports and stress tests showing the risk impact of changes in implied volatility as well as the volatility smile and term structure.
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