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niki
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Joined: April 10th, 2003, 2:17 pm

Vega on consumption option

November 3rd, 2008, 4:26 pm

Hello,I have been looking at consumption options (or timer options in some french banks). They are basically standard call/put option, the only difference is that you set a pre-defined variance budget for the underlying. If your underlying delivers the variance budget earlier than the maturity, then you have an early exit, if the underlying never delivers the variance budget, then the option behacves like a plain vanilla option.My issue is that I can't figure out the vega on this option, can someone help me? I would think it is close to zero, but this is intuition only..Thanks in advance