Volatility, Trading, Derivatives Market, Quantitative Finance, Finance.
a flat vol smile…). So we go long both swaps at a rate of σ=16%. For the first nine days (out of 20), the market doesn’t move whatsoever (daily returns are 0), so we decide to stop on our trade and sell 11days OUTRIGHT swaps for the remaining vega amount and the same vol strike (for some reason vol