Which volatility to use?

Soon2Bgreat said:
...as to your question about when to re-evaluate vol it gets to the question of when to hedge - it's either based on delta bounds or time intervals. Afaik delta bounds are superior absent trading costs.
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if you have a model for calculating the delta bounds for an option, how do you calc the delta bounds for a multi-leg position ? just adding the bounds of each legs ?
 
Yes. All greeks are additive, thankfully.

Unfortunately, the only way you will spot modality, as in a wrangle spread, is either graphically or a table/slide.
 
xandman said:
Yes. All greeks are additive, thankfully.

Unfortunately, the only way you will spot modality, as in a wrangle spread, is either graphically or a table/slide.
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does the additivity apply to delta bands, e.g. Zakamouline ?
 
xandman said:
Yes. All greeks are additive, thankfully.

Unfortunately, the only way you will spot modality, as in a wrangle spread, is either graphically or a table/slide.
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I think you have to be careful with vega. At least adjust by root-time (if trading calendars), then add.
 
@spec77 . Sorry. Formulas and derivations are currently out of my depth. My concept of delta band is my max delta exposure based on elementary (% capital/portfolio at risk) ideas.

@longthewings Thanks for the reminder. Vega risk is different across the term structure.
 
One measure of the relative volatility of a particular stock to the market is its beta. A beta approximates the overall volatility of a security's returns against the returns of a relevant benchmark (usually the S&P 500 is used). For example, a stock with a beta value of 1.1 has historically moved 110% for every 100% move in the benchmark, based on price level. Conversely, a stock with a beta of .9 has historically moved 90% for every 100% move in the underlying index.
 
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