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Dear Mr Moffat,
Would you please explain on the Greeks with the most easy way to grasp the meaning of delta, theta, gamma, vega and rho firmly. I am getting stuck in trying to understand them.
Many thanks,
Hanhvn
I can’t really add anything to what is in our free Lecture Notes – what is written there is all you really need.
Dear Mr Moffat,
I have read the Lectures Notes but I am still confused and not understand the answer of questions Kenduri and Troder, all in part c, asking about the Greeks. Perhaps I have not possessed a good enough background on that.
For example, the answer in Kenduri stated that Gamma measures the rate of change of the delta of an option and the delta for a long call can be near zero to near 1…The highest Gamma values are when a call option is at the money….
Would you please elaborate more on the above example.
Thanks a lot.
Hanhvn
When Troder was asked in the exam it did not have a part (c) – I have the actual exam in front of me 🙂
It would seem that whatever book you are using has amended it for some reason.The only time ever in the whole history of P4 (and previously it was called 3.7) that a question has asked more than what is in the notes about the Greeks was in the Kenduri question. Otherwise when anything has been asked it has been like part (c) of question 4 in the June 2014 exam.
Given that it was only 3 marks, and that 1 of the marks would be gained by simply stating what gamma represents (the rate of change of delta), I really would not worry about it (and for the same reason, I will not be changing the notes with regard to the Greeks.)
Hi sir, does it mean that in exam i am not expected to explain when gamma(or other greeks) is positive or negative or when its value is the highest? Because i read about it in textbook and couldn’t really understand it.
It is extremely unlikely that the examiner would ask that (and if he did it would be for very few marks).
You need to understand and be able to calculate delta ( N(d1) ) but for the others just make sure you can say what they measure (to the level that is in our free notes and lectures).
Sir , can u simply explain me the (price of option ) I have gone through the notes and it’s questions but not getting exactly the meaning of price of option?
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