Unexplained P&L (residual)
Definition · Level 5 · Greeks & volatility
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The part of a day’s profit and loss that the Greeks, even with second-order terms, do not account for: higher-order effects, a skew move or a mispriced leg. A growing residual is a warning.
Example
After delta, gamma, vega, theta, vanna, volga and charm, $23 was left over.
Where Tradecraft teaches it
Level 5 · Greeks & volatility, in the lesson “P&L explain: where did the day’s money go?”: Split one day’s profit and loss across the Greeks, and see what the second-order terms recover.
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