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Unformatted text preview: Delta: Δ >the rate of change in the price of an option, relative to the price change in the underlying asset >also called the hedge ratio Δ = N(d1) = ΔC/ΔPGamma: Γ >the rate of change in delta, relative to price change of the asset >low gamma = not changing hedge a lot Γ = N(d1) – N(d1) P+1Theta: Θ >rate of change in the option price relative to a oneday change in expiration >also called time decay Θ = C T – C T1Vega: Λ >rate of change in the option price relative to a 1% change in volatility Λ = C V – C V+.01Rho >rate of change in the option price relative to a 1% increase in the discount rate...
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This note was uploaded on 12/21/2011 for the course SPEA V366 taught by Professor Aleksey during the Fall '11 term at UCSB.
 Fall '11
 Aleksey

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