April 7th, 2008, 11:35 pm
QuoteOriginally posted by: AlanQuoteOriginally posted by: PaperCuthoracio's right. Vega in the ordinary sense is the sensitivity to a parallel shift in BS vols. So you need to bump the a priori BS surface, re calibrate, the measure valuations, then difference them.Won't this just generate the same -formula- for the BS vega, except the volatility in it is the BS implied vol.?Or, what am I missing?Yes, I think you are right, I guess I was assuming that the structure in question was somehow not Black Scholes friendly, but there was still a requirement for a "vega" hedge.