95 30 20 10 slope 067 slope 020 0 10 0 10 20 30 40 50

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Unformatted text preview: 0 70 80 90 100 ∂2C ≡ Gamma (Γ) ∂S 2 = the change in slope UNDERLYING ASSET LEVEL (arbitrary) Derivatives IV: R. J. Hawkins Econ 136: Financial Economics 3/ 13 Price Risk: “the greeks” Call option C (S , K , σ, r , t ) : ∂C ≡ ∆, ∂S ∂2C ≡Γ ∂S 2 Put option P (S , K , σ, r , t ) : ∂P ≡ ∆, ∂S ∂2P ≡Γ ∂S 2 ∂C ≡ Vega (?) ∂σ ∂P ≡ Vega (?) ∂σ ∂C ≡ Rho (ρ) ∂r ∂P ≡ Rho (ρ) ∂r ∂C ≡ Theta (Θ) ∂t ∂P ≡ Theta (Θ) ∂t Derivatives IV: R. J. Hawkins Econ 136: Financial Economics 5/ 13 CME SPAN® : The Risk Array Each element corresponds to a particular scenario. Each element in the risk array represents a theoretical profit or loss in the associated scenario. A complete revaluation is done for each scenario. Two extreme scenarios are included to test for deep out-of-the-money options. Credit default swaps (CDS) The risk for the portfolio is the largest loss across the array. Derivatives V: R. J. Hawkins Econ 136: Financial Economics 13/ 25 Va...
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This note was uploaded on 01/23/2014 for the course ECON 136 taught by Professor Szeidl during the Fall '08 term at University of California, Berkeley.

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