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Questions tagged [elasticity]

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2
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3answers
175 views

A more mathematically rigorous explanation for why in the B-S model, the expected return on a call goes down as the stock price goes up

A problem asks whether the following statement is true assuming the Black-Scholes Framework: The expected return on a call option goes up as the stock price goes up. The solution is: The ...
2
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0answers
168 views

How do we know that the instaneous rate of return on this option, $\gamma$ is negative?

I am self-studying models for financial economics and encountered the following problem: I don't see how the author can conclude that $\gamma = -0.62$. Let's rearrange the second to last equation: $$\...