Autocalls hit peak vega, where hedging costs mount

Jitters are growing among structured product issuers as the stock indexes underlying popular autocallable bonds plunge through a shadowy inflection point known as peak vega, where hedging costs surge and losses can mount.

This fabled territory, where issuers of the products see their volatility sensitivity flip from long to short, has already been surpassed on the Eurostoxx 50 and Japan’s Nikkei