Options - Part 4

Options - Part 4

Overview

This eCourse consists of two modules which covers the “Greeks” - the various sensitivities of an option to different factors. They are called “Greeks” because each of those sensitivities is usually denominated by a Greek letter: delta, gamma, theta, and so forth. The management of options, particularly the management of option portfolios, is complicated by these multiple sensitivities. A key phrase for market participants is 'dynamic hedging'; unlike some other financial instruments, hedging and management of option portfolios requires constant vigilance. Awareness of the various changes in value due to market movements is essential.

The two modules in this series provide definitions of each of the key sensitivities, and show the calculations for values in terms of the theoretical continuous-time Black-Scholes-Merton option pricing model. The modules also show how these values change with respect to common variables such as time and strike price. Finally, 'real world' adjustments to the theoretical values are examined in order for those sensitivities to be useful to an option participant.

Module 1 focuses on delta and gamma, which addresses the exposures generated by a change in the underlying price of an asset by examining the key sensitivities of delta and gamma.

Module 2 focuses on the way an option generates exposure given changes in market variables. In this module, the major sensitivities of an option’s price, relative to time, volatility, and interest rates, are outlined. This module also examines other secondary measurements and focuses on the issues faced when managing a portfolio of options.

Objective

On completion of this course, you will be able to:
- Define delta, explain how it is measured, how it changes, and how it is managed
- Define gamma, explain how it is measured, how it changes, and how it is managed
- 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

Content

Module 1: Options - Greeks (Part I)
Topic 1: Delta
Topic 2: Gamma

Module 2: Options - Greeks (Part II)
Topic 1: Theta, Vega, and Rho
Topic 2: Secondary Sensitivities
Topic 3: Hedging & Portfolio Issues

Details

Code
TEPDS17003401
Venue
ePlatform
Language
English
Level
Advanced
Hours
SFC:2.5, PWMA:2.5
Fees
All Member: HK$750
Non-Member: HK$1125
Staff of Corporate Member: HK$750