Vega Spread?

zxem · March 12th, 2008, 2:14 pm

Hi, has anyone heard about the concept of Vega Spread in options world or just for FX options? Basicly, this spread will be added on top of the fair value to create the client price. Does anyone know where this concept is coming from and how to calculate it for different trade types, i.e. Vanilla/ Barrier/One touch/etc.Thanks

amit7ul · March 12th, 2008, 3:14 pm

don't know much, but i guess it might be related loosely to the notion that spread in price is vega times spread in vol

zxem · March 13th, 2008, 5:11 pm

I think trader uses this concept to try to cover the cost of Vega Hedge of exotic trades