Volga: Second-Order Vol Sensitivity - Quant Trader Interview Question
Difficulty: Hard
Category: Options & Greeks
Practice quant interview questions from top firms including Jane Street, Citadel, Two Sigma, DE Shaw, and other leading quantitative finance companies.
Topics: options, greeks, volga, vomma, volatility risk, vega, second-order greeks
Problem Description
You are a volatility trader at a firm like Jane Street. You are managing a portfolio of options on the S&P 500 (SPX). A large market-moving event is expected soon. You need to understand the potential impact of changes in implied volatility on your portfolio's vega.
What does Volga (also known as Vomma) measure, and what type of risk does it primarily address?
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