Greeks

taoyu

New Member
Hello, David:

In reviewing the Greeks chapter, I find it contains too many formulas. For example Theta, Gamma, Vega, Rho. Do we need to memorized all these formulas?

By the way, I really enjoyed your teaching. Thank you very much.

Tao
 

David Harper CFA FRM

David Harper CFA FRM
Subscriber
Tao,

in regard to the Greeks, technically the AIM includes the ability to "compute."

However, as a practical matter, the testability of this is very low (I cannot recall a single sample test question that asks to compute the Greeks outright).However, since Delta is straightforward I know know Delta.

It is more realistic to be given a Greek and asked to do something with it, like some of John Hull's sample questions; e.g., here is rho of x, what is change of call price

So, mostly i support your idea here. But only in regard to the formulas, right? you are very likely to be tested on these partial derivtives as concepts (e.g, what is the gamma of out of the money option? what is theta doing as option approaches expiration?)

Finally, there are two AIMs asking about gamma-neutral and rel. between delta, theta, and gamma. So you want to look at those...but you can see, i mostly agree with you, there are many formulas in the exam and the particulars of the Greeks, esp non delta would be low on my list....

Thanks for your kind feeback! really appreciate you like the tutorials...David
 
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