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April 30, 2024
9 Free Financial Modeling Lessons
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I thought we were talking about Frats based on the title.. Guess not.
Delta: change in the option price for a change in the underlying (like speed in physics) Vega: change in the option price for a change in the implied vol Gamma: change in the delta for a change in the underlying (like acceleration in physics)
I would suggest that you sit down and study the charts of how these (and other Greeks) change for a given change in the underlying and be able to recreate each of the charts to better understand how they interact with one another.
Dont really like to push my own stuff, but if you are stuck for time check out my interview guide. Wont say more, others who have used in can chime in with reviews if they want.
You'll need to know all first order (Delta, Vega, Theta, Rho) and Gamma. If you are doing exotics you might need something more, typically correlation and x-gamma. You can look up what they measure. As to how, they are mathematical derivatives. You also need to think about the relationships between them (like if delta changes if there's a change in implied vol) although there are other greeks for that. You also need to think about how the greeks change as spot moves across the strike and as time to maturity decreases. These are very typical questions in options desk, but you need to come up with the answers yourself.
Maximus -- Awesome, appreciate it.
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