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Results tagged with gamma
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user 16463
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Greeks: Why does my Monte Carlo give correct delta but incorrect gamma?
For a vanilla European call, my Monte Carlo method gives the right option price and delta but the wrong gamma. In particular, the value of gamma varies wildly each time I run the method. … I estimate gamma by
$$
\Gamma = \frac{C(S+\Delta S,K,T,\sigma,r) - 2C(S,K,T,\sigma,r) + C(S-\Delta S,K,T,\sigma,r)}{(\Delta S)^2}
$$
Here's my Matlab code. Could anyone tell me what I'm doing wrong? …
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