Addendum to Geopolitical vega

LSEG errata & added details on return estimation

Key insights

• This note updates the insurance option baskets in my prior note, Geopolitical vega, with more realistic pricing of swaptions given that a few clients pointed out the prices provided to me by LSEG (Reuters) are not dealable.

• Also included is a more detailed explanation of the exact process I used to calculate exit values in each scenario.

• The updated baskets no longer offer “retire-early” returns, but do provide expected multiples of between 4-9x with scenario returns as high as 29x (Covid-level vols) on 6m options, and 2-3x with scenario returns up to 14x on 1y options, all with premiums around 1% of notional value.