Last week I briefly discussed convexity as it relates to bond pricing. Vomma is similar in that Vomma is to Vega as Convexity is to Duration.
Vomma is the rate of change in Vega. Vega is the change in price of an option due to a change of 1% in volatility estimate of the underlying investment.
Why did I write about this? Writer’s block. That, and “Vomma” just strikes me as funny sounding.
If you really want to learn more about options, check out Mark Wolfinger’s blog. It looks like he’s launching a new premium site (paid content), but there is plenty of free content available there.
Hi Preet. Talk about “moola lingo,” I have no idea what you are talking about, but you mentioned bonds. I’m wondering if I should lighten up on my bond holdings given interest rates are going to climb at some point. About 11% of my holdings are in high-yield bond funds. Could this be too much?
Hi Laura – sorry for the delayed reply.
Hard to say based on the info, but personally I don’t seek higher returns from bonds. Historically, you take on less risk just by increasing your equity exposure. I used fixed income for safety – I try not to get fancy with it. I wrote about this in more detail here: http://bondsareforlosers.com/re-thinking-high-yield-fixed-income/
Thanks, Preet. Your post on this topic is very helpful.