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Black-Scholes-Merton Model & “Greek Risk”

October 12, 2015
Sensitivity Factor (“Greek”) Input Calls Puts
Delta Asset Price (δ) Positively related
Delta > 0
Negatively related
Delta < 0
Vega Volatility(σ) Positively related
Vega > 0
Positively related
Vega > 0
Rho Risk Free Rate (r) Positively related
Rho > 0
Negatively related
Rho < 0
Theta Time to Expiration (T) Value -> $0 as call -> maturity
Theta < 0
Value usually -> $0 as put -> maturity
Theta < 0
Exercise Price (X) Negatively Positively
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From → Asset Valuation

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