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Derivatives

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  • February 19, 2021
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Vega-Neutral Portfolio

A portfolio of options which has a vega of zero. That is, the option combination implies a neutralized vega. This setting offers a hedge against the implied volatility of the underlying. An investor willing to protect a portfolio from changes in the underlying volatility, the portfolio needs to be made “vega-neutral”. In general, a portfolio being vega-neutral doesn’t necessarily mean that it is also gamma-neutral, and vice versa.


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