Friday night junior derivatives trader interview question. Read the footnotes in the quoted thread before you wisecrack.https://twitter.com/bennpeifert/status/1264542177574584320 …
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One year to maturity. Three strikes: 95 (22 vol); 100 (21 vol); 105 (20 vol). Rates and divs are zero. 1) Structure me a position that is flat gamma and vanna but long volga 2) What is your best approximation of your PNL tomorrow as a function of moves in primary risk factors?
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Long wings and short belly in roughly 1:2:1 ratio (more accurate than that, I need to write stuff down). Surface has skew but no curvature so theta should be small and main determinant of PnL will be volga (squared implied vol move) and fly vega (ie wings up, belly down)?
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0.9 : 2 : 1.1 is probably a better guess for the ratios given the skew
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Damn... you'd made a really good junior trader... How are your booking and coffee delivery skills?
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