How does one hedge the vega of options on commodity baskets - for example, GSCI or DJAIG commodity index? Are there variance swaps available on these? Is it feasible to hedge for individual commodity futures contracts?All ideas welcome.Thanks

NapierNo surprise you havent received any answer on this yet. The topic is in fashion and well guarded.No variance swaps for sure, and they wouldn't take you far, but a secondary market composed of a few (5) banks making (sometimes wide) prices on Euros.Having said that, that prob. doesnt help you as you are not enclined to pay their vol spread. Just one lead on this: think about what these indices are from an intuitive point and you may find the beggining of an answer by yourself using very simple concepts.If you have some experience in commodity derivatives and have an idea about curve modelling in these markets, you should be able to build something. CheersJezza