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Cross pair vega limit
Guys,Anyone could share some experience how in practice bank set their vega limits for cross curreny pairs Let's say we have a EURUSD, USDJPY and EURJPY FX option in the portfolio. Due to the divesification effect, It doesn't make too much sense to have a gross vega limit on the entire portfolio or even a separate vega limit on each currency pair.Just wondering how this is done in practice in banks. Do they break the cross pair vega into major pair vegas and limits are set soely on major pairs or is there any other alternative?Many thanks for the help