How is quantity of model risk dependency on vega hedge
How is quantity of model risk dependency on vega hedge?
Expert
As along with gamma hedging, one can vega hedge to decrease sensitivity to the volatility. It is a main step towards eliminating several model risks, because it reduces dependence upon a quantity that is not known very accurately.
You are trying to save to buy a new $150,000 Ferrari. You have $40,000 today that can be invested at your bank. The bank pays 5.5% annual interest rate on its accounts. How long will it be before you have enough to buy the car?
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