tag:blogger.com,1999:blog-84697752687033422672011-11-27T15:23:11.970-08:00Nigerian Bloggerhttp://www.blogger.com/profile/09128946855549565664noreply@blogger.comBlogger11100tag:blogger.com,1999:blog-8469775268703342267.post-55547661559697018152007-06-10T01:07:00.000-07:002007-06-10T01:56:04.774-07:00A simple way to memorize <a href="http://en.wikipedia.org/wiki/The_Greeks">the Greeks</a> used in the <span style="font-weight: bold;">Black-Scholes </span>model for option pricing is to remember they all relate to the inputs Price, time-to-expiration, volatility and Interest rate.<br /><br /><span style="font-weight: bold;">Delta</span> denotes rate of change and is the rate of change option price with underlier Price<br /><span style="font-weight: bold;">Gamma</span> is the second partial derivative of option price with underlier price and is also the second Greek alphabetically.<br /><span style="font-weight: bold;">Vega</span> is the rate of change of option price with volatility. Vega starts with a V and so does volatility.<br /><span style="font-weight: bold;">Theta</span> is the rate of change of option price with the time-to-expiration. Theta starts with a T and so does time-to-expiration.<br /><span style="font-weight: bold;">Rho</span> is the rate of change of option price with interest Rate. Rho starts with R and so does Rate.<div class="blogger-post-footer"><img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/8469775268703342267-5554766155969701815?l=finengine.blogspot.com' alt='' /></div>Nigerian Bloggerhttp://www.blogger.com/profile/09128946855549565664noreply@blogger.com0