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FINANCIAL MARKET COURSES

Options - Greeks (Part II)

This course is the second of two courses which focus on the way an option generates exposure given changes in market variables. The first course (Options - Greeks (Part I)) addressed the exposures generated by a change in the underlying price of an asset by examining the key sensitivities of delta and gamma. In this second course, the remaining major sensitivities of an option’s price, relative to time, volatility, and interest rates, are outlined. This course also examines other secondary measurements and focuses on the issues faced when managing a portfolio of options.

  • OBJECTIVES

    On completion of this course, you will be able to:

    Describe and define the Greeks: theta, vega, and rho

    Describe some other key sensitivities, in particular those that relate to exposures generated given a change in something other than the price of the underlying asset

    Explain how option sensitivities are connected to the concept of hedging, and the problems created by (or inherent in) a portfolio of multiple instruments

  • COURSE OUTLINE

    Topic 1: Theta, Vega, and Rho

    Definition of Theta

    Calculating Theta

    Maximum Theta

    The Changing Rate of Theta

    Gamma and Theta

    Theta and Volatility

    Time Decay and Theta

    Definition of Vega

    Calculating Vega

    Vega and Moneyness

    Vega and Time to Maturity

    Definition of Rho

    Calculating Rho

    Changes of Rho

    Topic 2: Secondary Sensitivites

    Lambda

    Phi & Rho2

    Combined Sensitivities

    Other Things Do Not Remain Equal

    Shadow Gamma

    Topic 3: Hedging & Portfolio Issues

    Why the Greeks are Important

    Out-of-Model Hedging

    Hedging Options with Options

    Portfolios and Additive Positions

    Bucketing and Vega

    Bleeds

    Changing Gamma

  • PREREQUISITE KNOWLEDGE

  • ESTIMATED COMPLETED TIME

    75 Minutes

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