18
Greeks in Options
LEARNING OBJECTIVES
After completing this chapter, you will be able to answer the following questions:
Why is it necessary for financial institutions to hedge their option positions?
Why is it difficult to hedge option positions?
What is meant by the delta, gamma, theta, vega, and rho of options?
What is meant by delta hedging?
How can one make an option gamma-neutral?
How are the delta, gamma, theta, vega, and rho of an option calculated?
BOX 18.1 Why Greeks?
It is important to know how option prices move in order to make money consistently. Since the value of options changes when the underlying asset price changes, one needs to know the relationship between the movements in stock price and option price. Options ...
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