AppliedNumeric answer
You buy the -delta call and sell the -delta put, each with vega per volatility point per share, delta-hedged. The skew flattens: the put’s implied volatility falls points and the call’s rises . What is your vega P&L per share?
Answer with a number. Fractions, powers and expressions like 23/6 or C(52,5) are read correctly in practice.
The worked solution is in Premium
The answer, the full working and the one idea to take away – for this and all 1,322 questions in the bank. Answer it in practice and your working is marked, with a known mistake named when you make one.
Learn the method
Reported in interviews at
More volatility questions
- Forward volatility across the term structure, part 1 of 3Foundation
- At-the-money volatility is 19%, the 25-delta call is at 18% and the 25-delta put at 23%.Applied
- Index implied correlation has tended to exceed the correlation later realised…Applied
- Forward volatility across the term structure, part 2 of 3Applied
- You believe index skew is too steep. What is the cleanest expression of that view?Advanced
- An index holds two stocks in equal weight, with implied volatilities of 30% and 20%.Advanced