February 9th, 2011, 9:52 pm
Might be missing the point, but for 1y5y atm in 6m becoming 6m5y probably OTM..the risk is managed as plain vega risk, and everyday as time passes and fwd changes,the vega exposure changes while the rho and volvol exposure goes from zero to some value..And further pnl is captured via vol slide daily..i.e. Valuing the portfolio today, and same valuation with T+1Actually i dont think i've made a relevent point..but the above is correct right?