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Trading Reference Links
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Vega trades...done either onfloor or off can be any of a number of
trades.
The major institutional houses sell their customers straight Vega
trades. For example sell a one year 28 vol on $1,000,000,000 portfolio.
If a year later the vol is 35 the customer receives the 7 vol
difference.
Generally the hedge is a simple long buy/sell which is rolledd because
long vol in the marketplace is generally lower. The trades are almost
always a european hedge so the customer can only settle in one year.
Generally settlement is over a period of days..i.e the closing vol for
the period November 10 - 15, 1998.
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