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Quantitative Finance · Glossary

What is Vega notional?

Definition 14.3 Derivatives and Volatility · Chapter 14 — Variance Swaps and Volatility Derivatives

The vega notional of a variance swap is Nvega=2KNvarN_{\mathrm{vega}}=2KN_{\mathrm{var}}: the approximate payment for one volatility point of realised volatility above the strike, near the strike. Trades are quoted in vega notional and settled in variance notional.

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