Thats fair comment from a sell side perspective. However, Valuation is more important than delta/hedging from a Buy side perspective, hence need to worry about it.. (I'm from buy side)

Thanks. Unit for Vega is USD per 1% vol move. So vol moving from say 4.5% to 5.5%.

results didn't look aligned. posting them separately Mkt ValBS 1,204,141VV 1,250,766LSV 1,422,893 VegaBS 457,556VV 329,082LSV 296,997 $Diff to BSBS VV 46,624LSV 218,752 Num Vega (BS)BS VV 0.10 LSV 0.48

<t>Thanks pimpel, this is very useful. Just to close this one, I priced a vanilla USDCNH using strike corresponding to 25DFwd (in BS framework) - controlled experiment.Results as follows: Mkt Val Vega Diff Num Vega (BS)BS 1,204,141 457,556 VV 1,250,766 329,082 46,624 0.10 LSV 1,422,893 296,997 218,7...

So in other words, are we saying in an ideal world, prices for vanilla european fx options using BS, VV, LSV, or any other better model should be the same?

<t>Dear All, I modelled a vanilla european FX Option on Bloomberg (100mm USD Call/CNH Put 2Y 6.5) using Black Scholes, Volga Vanna, Stochastic-Local Vol models available on Bloomberg OV screen.I get very different results.BS: 1.73mm USDVV: 1.82mm USDLSV: 1.90mm USDI am unsure how to interpret this d...

And I guess related question is - in this example does JPMorgan lend the bond to Citibank or does JPMorgan transfer the ownership (Sell) to Citibank.

Yes. Does it matter though?thanks.

<t>I am trying to better my understanding on mechanics of repo and how counterparty exposure changes after a repo transaction.If a hedge fund XYZ has $100mm bonds (priced at par) with JPMorganand later XYZ repos out $80mm of the bond to Citibank and receives $75mm after haircutBefore the repo, JPMor...

<t>I am pricing 10Y-2Y CMS Steepner option [Payoff: Max(10y-2Y-k,0)] in normal framework using 10y volatillity, 2y volatility and correlation between the two.The question I have is - how to lookup 10y and 2y vols from normal vol surface? Is ATM vols appropriate? If 10y-2y is far from strike, do I di...

<t>Volatility surface based on volatility of VIX Options [backed out using VIX futures (UXA Index), Options on VIX, Black/lognormal framework] is surprizingly flat, excluding the immediate expiration and very low strikes. Given VIX follows a mean reverting pattern and has future curve resembling a p...

That is true. How is it systematically handled? How much strike to reduce for Vol Swap?

<t>When entering into Variance Swap vs Volatility Swap for same underlying security (say SPX) and same tenor, should one expect to get a different vol quote?From my understanding Volatility Swaps cannot be perfectly hedged so broker dealers just increase the bid/ask spread when quoting for Volatilit...

Understood, essentially use monte carlo. Any thoughts on which IR Model would be most appropriate for this type of instrument?Thanks.

Is (implied) correlation readily available? Is it stable?From practical standpoint, does everyone use historical correlation? how many days of history is recommended?