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MATH 2281 3.0MW (Financial Economics)
The class on March 25 was delivered by Prof. Kuznetsov. The following
topics were covered:
- Reviewing the definitions of the Greeks.
- Deriving a formula for delta for European call options.
- Deriving a formula for delta for European put options (via put-call parity and the result for calls)
- Positivity/negativity of Gamma, Vega, Theta and Rho, both for
calls and puts. Not via analytic derivations, but by examining graphs
produced by Matlab and seeing how they change when the parameters change
- Briefly discussing delta hedging for Black-Scholes-Merton prices and showing
Matlab simulations of how the hedging error goes to zero as the frequency