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A stock price is $50 with annual volatility of 20%. Assume a risk-free rate of 6%...

A stock price is $50 with annual volatility of 20%. Assume a risk-free rate of 6% p.a. The strike price of a European put is $50 and the time to maturity is 4 months. Calculate the following Greeks for the put:

11.1 Delta

11.2 Theta

11.3 Gamma

11.4 Vega

11.5 Rho

If the stock price changes by $2 over a short period of time, estimate the change in option price using the Greeks?

Solutions

Expert Solution

All the above Greeks of a call option can be calculated by help of Black Scholes model of option valuations with following

formula as:

The change in option price with change in stock can be explained by Delta ,

so, here net change in option price with change of $ 2= $2* -0.409 = $ -0.8186 .

jeff jeffy answered 1 year ago
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