Gamma γ The change in the delta produced by a 1 point change in the price of

Gamma γ the change in the delta produced by a 1

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Gamma ) - The change in the delta produced by a 1 point change in the price of the underlying asset. Gamma measures Convexity , which turns into risk in a delta neutral hedge. Vega or Kappa (κ) - The change in the option value produced by a 1 percentage point change in the volatility of the underlying asset. Vega measures Volatility Risk (despite not being a true letter in the Greek alphabet). Theta ) - The change in the option value produced by a 1 day drop in the time to maturity. Theta measures Time Decay . Rho ) - The change in the option value produced by a 1 percentage point change in the interest rate. Rho measures Interest Rate Risk .
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1 st Case: Volatility Constant Spot Price: 98 102 +4,1% Days until expiration: 50 40 Call (X=100) Bid 2,19 20% Bid 3,99 20% Ask 2,33 21% Ask 4,11 21% Estimated Profit: 1,66
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