Gamma: related pages

Gamma hedging

A hedge constructed using both the delta and gamma of a portfolio. A gamma hedge needs less frequent re-balancing than a delta hedge.

Delta

The delta of a derivative is the rate of change in the price of a derivative with the price of the underlying.

Delta hedging

The delta of a derivative can be used to hedge a holding of the derivative with a position in the underlying security or vice-versa.

Rho

The rate of change of the price of a portfolio or derivative with the interest rates.

Theta

The rate of change of the value of a derivative or portfolio with time.

Vega

The rate of change of the price of a derivative or portfolio with the volatility of an underlying security.

Greeks

Measures of the rate of change (mathematically the derivative) of the price of a derivative security or portfolio with another quantity.

Black-Scholes

The most widely used method of option valuation. More complex models are sometimes necessary as it uses a number of simplifying assumptions.

Dynamic hedge

A hedge that needs to be adjusted as the price (and sometimes other characteristics) of the portfolio or security it is hedging changes.