Cryptocurrency Q&A
Why is Vega of a stock zero?
Why is Vega of a stock zero?
Luca
Tue Jul 02 2024
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5 answers
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Could you elaborate on why the Vega of a stock is zero? I'm curious to understand the underlying reasons behind this phenomenon. Vega, as we know, measures the sensitivity of a financial instrument's value to changes in volatility. But with stocks, which typically don't have explicit volatility derivatives, how does this concept translate? Is it because stocks are inherently less volatile than other assets, or is there a more fundamental reason? Clarifying this would help me better grasp the nuances of financial risk management and asset pricing.
5 answers
TaegeukChampion
Wed Jul 03 2024
Therefore, under this condition, vega for the share effectively becomes zero, indicating that the share price is not influenced by changes in volatility when all other variables are held fixed.
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Alessandra
Wed Jul 03 2024
Vega, in the context of finance, refers to the sensitivity of a financial instrument's value to changes in volatility.
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mia_clark_teacher
Wed Jul 03 2024
When discussing vega for a share, it specifically measures how the share price responds to fluctuations in volatility, while all other parameters remain constant.
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GyeongjuGloryDays
Wed Jul 03 2024
These "other parameters" encompass a range of variables that can influence the share price, such as market sentiment, earnings reports, and economic indicators.
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DigitalBaron
Wed Jul 03 2024
However, in the case of vega for a share, the assumption is made that all such parameters remain static, focusing solely on the impact of volatility changes.
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