•
Gamma
(γ
)
- 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
(θ
)
- The change in the option value produced by a 1 day drop in the
time to maturity. Theta measures Time Decay
.
•
Rho
(ρ
)
- 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