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Risk Limit on Long gamma
IN our risk control, we have limits on the long gamma. We cant think of any reason why we should have limits on long gamma. We are thinking of getting it removed. but i wanted to see if ayone can think of a reason from risk perspective, why you would want to have a control on the amount of positive gamma?Thanks
Risk Limit on Long gamma
I can't imagine why. you should have a theta, delta and vega limit.
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Risk Limit on Long gamma
Does sound weird, but some desks are constrained by unsigned gamma limits. Maybe your risk control people think gamma is expensive?
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- Martinghoul
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Risk Limit on Long gamma
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Last edited by Martinghoul on April 28th, 2008, 10:00 pm, edited 1 time in total.
Risk Limit on Long gamma
if one has a combined scenario limit on hte options net of delta hedges , Gamma limit may not help much in addition ..however very high gammas can be a concern at times but maybe only negative ones..
Risk Limit on Long gamma
Not for positive Gamma, though I agree that for say Digital Options this can become screwy close to Expiry / Strike and hence serves as a good MI tool.......