New answers tagged greeks
3
Think of this in terms of Taylor series. Let's say the option price today is $C\left(S,t\right)$ where S is the underlying price and t time. Let's say the underlying price changes by $\Delta S$ in a time interval $\Delta t$, so your P/L will be:
$\mathrm{P/L}=C\left(S+\Delta S,t+\Delta t\right)-C\left(S,t\right) $
Use Taylor series to first order in t and ...
1
These papers study delta-hedging of equity options with different models.
@Article{,
author = {Gurdip Bakshi and Charles Cao and Zhiwu Chen},
title = {Empirical Performance of Alternative Option Pricing Models},
journal = {Journal of Finance},
year = 1997,
volume = 52,
number = 5,
pages = {2003--2049},
}
@Article{,
author = {...
0
It is simpler than the other Greeks, and the reason you don't hear a lot about $\rho$ is because it has smaller impact in the scheme of things. Let's say we are in the BS world, then the rho formulae for a call or put are rather simple:
$\rho_{\mathrm{Call}} = K { e^{- r_{d} \tau} }\tau { N\left (d_{2} \right ) }$
$\rho_{\mathrm{Put}} = - K { e^{- r_{d}...
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