Option's value - Greek measures fluctuations and their consequences

Abstract

Options are financial instruments that can be applied in many situations. Options buyers sell risk which is bought by their sellers who are obliged to reduce it as much as possible. It can be done by using hedging strategies based on Greek letters and options values analysis. The author proves that Greek letters are not constant during the time of option’s life. The paper shows to what extent they are influenced by such factors as risk free interest rate, volatility, underlying asset price and time to maturity. The conclusion is that options sellers must play an active role, i.e. follow fluctuations of all these parameters and modify their hedging portfolios regularly.

Keywords

• options
• Greek measures
• fluctuations