Binomial and Black Scholes - 111153

Dura on:
Dura on is the average life of Bond. The life of bond is inversely related with bond
value. Longer the life, lower will be the value of bond and vice versa.
EXAMPLE 22:
An 8% bond is traded in the market. The maturity period is 5 years. Interest is payable on
annual basis. Market yield rate is 10%. What is fair value of bond? What is dura on of bond?
What is convexity of bond if interest rate increases to 11%.
YEAR CASH FLOWS PVF = 1/ (1+i)n PV of CF PV of CF * t

1 80 .909 72.72 72.72
2 80 .826 66.08 132.16
3 80 .751 60.08 180.24
4 80 .683 54.64 218.40
5 1080 .621 670.68 3353.40
= 924.20 = 3956.92
a. Present value of Bond.

PV Factor = 1/ (1+i)n
PV of bond = 924.20 (it is net present value of cash ows from bond in 5 years)
b. Dura on of Bond
or whereas: t stands for me (year)
= 4.32 years
b. Convexity of Bond
Change in Bond value due to change in interest rate.
New interest rate is 11%, old is 10%, it is denoted by
Convexity = - = -4.32 * = -.39 , -3.9%
It means every 1% increase in interest rate will decrease a value of bond by 3.9%.
Valuation of Options
Until now, we have looked only at some basic principles of option pricing. Other than put-call
parity, all we examined were rules and conditions, often suggesting limitations, on option
prices. With put-call parity, we found that we could price a put or a call based on the prices of
the combinations of instruments that make up the synthetic version of the instrument. If we
wanted to determine a call price, we had to have a put; if we wanted to determine a put price,
we had to have a call. What we need to be able to do is price a put or a call without the other
instrument. In this section, we introduce a simple means of pricing an option. It may appear
93
Waseem A. Qureshi MM141063

that we oversimplify the situation, but we shall remove the simplifying assumptions gradually,
and eventually reach a more realistic scenario.
Binomial Model
The word "binomial" refers to the fact that there are only two outcomes. In other words, we let
the underlying price move to only one of two possible new prices. As noted, this framework
oversimplifies things, but the model can eventually be extended to encompass all possible
prices. In addition, we refer to the structure of this model as discrete time, which means that
time moves in distinct increments. This is much like looking at a calendar and observing only
the months, weeks, or days. Even at its smallest interval, we know that time moves forward at
a rate faster than one day at a time. It moves in hours, minutes, seconds, and even fractions of
seconds, and fractions of fractions of seconds. When we talk about time moving in the tiniest
increments, we are talking about continuous time. We will see that the discrete time model
can be extended to become a continuous time model.
Two models:
1. Discrete model
Discrete model can be a. single period binomial model
b. Two period binomial model
2. Continuous model.
Continuous model can be a. Black-Schole Model
b. Merton Model
Some basic calculations, signs & formulas and model:
We start with a call option. If the underlying goes up to S+, the call option will be worth c+.
If the underlying goes down to S¯, the option will be worth C¯. We know that if the option
is expiring, its value will be the intrinsic value.
S0 = Spot price S+ = price goes up. S¯ = price goes down X= exercise price
S+ = Su = S0(1+u) where u is upward movement in price
S¯ = Sd = S0(1-d) where d is downward movement in price
C+ = Max(0, S+ - X) Maximum of 0 or S+ - X
C¯ = Max(0, S¯ - X) Maximum of 0 or S¯ - X
Value of call option =
Where as:-
Calculate no. of underlying to be purchased or sold against one unit of option.
It is,
94

Hedge Ratio: (net amount required to be invested)
H = nS C (initial outlay)
H+ = nS+ C+ (outlay one period later if price goes up)
H¯= nS¯ C¯ (outlay one period later if price goes down)
Following diagram illustrates this scenario, commonly known as a binomial tree.
S+ = S0(1+u)
C+ = Max(0, S+ - X)
S0
C=? S¯ = S0(1-d)
1- C¯ = Max(0, S¯ - X)
The call price today is C, which is weighted average of the next two possible call prices, C+
and C+. and 1-
risk free rate.
Example 23: (One period binomial)
Suppose the underlying is a non-dividend-paying stock currently valued at $50. It can either
go up by 25 percent or go down by 20 percent. Thus, u = 1.25 and d = 0.80.
S+ = Su = 50(1.25) = 62.50
S¯ = Sd = 50(0.80) = 40
Assume that the call option has an exercise price of 50 and the risk-free rate is 7 percent.
Thus, the option values one period later will be:
Option values at expiration:

C+ = Max(0, S+ - X) = Max(0, 62.50 - 50) = 12.50
C¯ = Max(0, S¯ - X) = Max(0, 4O - 50) = 0
S+ = 50(1.25) = 62.50
C+ = Max(0, 62.50 - 50) = 12.50
S0 = 50
C=? S¯ = 50(0.80) = 40
1- C¯ = Max(0, 4O - 50) = 0
95

a. What is the value of call option?
= 0.60
= 7.01 (Fair price of call option premium)
ARBITRAGE OPPORTUNITY:
Suppose the option is selling for $8. If the option should be selling for $7.01 and it is selling
for $8, it is overpriced-a clear case of price not equaling value. Investors would exploit this
opportunity by selling the option and buying the underlying. The number of units of the
underlying purchased for each option sold would be the value n:
= 0.556
Thus, for every option sold, we would buy 0.556 units of the underlying. Suppose we sell
1,000 calls and buy 556 units of the underlying. Doing so would require an initial outlay of :-
H = nS C = 556(50) - 1,000(8) = $19,800.

One period later, the portfolio value will be either
H+ = nS+ C+ = 556(62.5) - 1,000(12.5) = $22,250. OR
H¯= nS¯ C = 556(40) - 1,000(0) = $22,240.
These two values are not exactly the same, but the difference is due only to rounding the
hedge ratio, n. We shall use the $22,250 value. If we invest $19,800 and end up with $22,250,
the return is:-
= 0.1237 = 12.37%
The arbitrage will give 12.37% risk free which is better to risk free of 7%.
Example 24: (One period binomial)
Consider a one-period binomial model in which the underlying is at 65 and can go up 30

percent or down 22 percent. The risk-free rate is 8 percent.
A. Determine the price of a European call option with exercise prices of 70.
B. Assume that the call is selling for 9 in the market. Demonstrate how to execute an arbitrage
transaction and calculate the rate of return. Use 10,000 call options.
96

Solution:
First find underlying prices in the binomial tree. We have u = 1.30 and d = 1 - 0.22 =0.78.
S+ = Su = 65(1.30) = 84.50
S¯ = Sd = 65(0.78) = 50.70
Option values at expiration:

C+ = Max(0, S+ - X) = Max(0, 84.50 - 70) = 14.50
C¯ = Max(0, S¯ - X) = Max(0, 50.70 - 70) = 0
The risk-neutral probability is
= 0.5769
= 7.75 (Fair price of call option premium)
ARBITRAGE OPPORTUNITY:
Suppose the option is selling for $9. If the option should be selling for $7.75 and it is selling
for $9, it is overpriced-a clear case of price not equaling value. The number of units of the
underlying purchased for each option sold would be the value n:
= 0.4290
Thus, for every option sold, we would buy 0.4290 units of the underlying. Suppose we sell
10,000 calls and buy 4290 units of the underlying. Doing so would require an initial outlay of:
n= 10,000 x .4290 = 4290 options
H = nS C = 4290(65) - 10,000(9) = $188,850.

One period later, the portfolio value will be either
H+ = nS+ C+ = 4290(84.5) - 10,000(14.5) = $217,505. OR
H¯= nS¯ C = 4290(50.70) - 10,000(0) = $217,503.
These two values are not exactly the same, but the difference is due only to rounding the
hedge ratio, n. We shall use the $217,505 value. If we invest $188,850 and end up with
$217,505, the return is:-
= 0.1517 = 15.17%
The arbitrage will give 15.17% risk free which is better to risk free of 8%.
97

Valuation of options: (Two period binomial model)
S+ +
C+ +
S+
C+ S+ ¯
C+ ¯
S0 S¯ +
C=? C¯+
1- S¯
C¯ S¯ ¯
C¯ ¯
S0 = spot price current price of the underlying

S+ = Su = S0(1+u) where u is upward movement in price
S¯ = Sd = S0(1-d) where d is downward movement in price
C+ = Max(0, S+ - X) Maximum of 0 or S+ - X
C¯ = Max(0, S¯ - X) Maximum of 0 or S¯ - X
S+ + = S+u = Suu = Su2 = S0(1+u)2
S+ ¯ = S+d = Sud = S0(1+u) (1-d)
S¯ + = S¯u = Sdu = S0(1+u) (1-d)
S¯ ¯ = S¯d = sdd = Sd2 = S0(1-d)2
C+ + = Max(0, S+ + - X)
C+ ¯ = Max(0, S+ ¯ - X)
C¯ ¯ = Max(0, S¯ ¯ - X)
(value of call option)
98

Number of units of underlying for each unit of option.
Example 25: (Two period binomial)

Consider a two-period binomial model in which the underlying is at 30 and can go up 14
percent or down 11 percent each period. The risk-free rate is 3 percent per period.
A. Find the value of a European call option expiring in two periods with an exercise price of
30.
B. Find the number of units of the underlying that would be required at each point in the
binomial tree to construct a risk-free hedge using 10,000 calls.
SOLUTION:
First find underlying prices in the binomial tree: We have u = 1.14 and d =1- 0.1 1 = 0.89.
S+ = Su = S0(1+u) = 30(1.14) = 34.20
S¯ = Sd = S0(1-d) = 30(0.89) = 26.70
S+ + = Su2 = S0(1+u)2 = 30(1.14)2= 38.99
S¯ ¯ = Sd2 = S0(1-d)2 = 30(0.89) 2= 23.76
S+¯ = Sud = 30(1.14)(0.89) = 30.44
Option prices at expiration:

C+ + = Max(0, S+ + - X) = Max(0, 38.99- 30) = 8.99
C+ ¯ = Max(0, S+ ¯ - X) = Max(0, 30.44 - 30) = 0.44
C¯ ¯ = Max(0, S¯ ¯ - X) = Max(0, 23.76 - 30) = 0
We will need the value of :

= 0.56
1- = 1 - 0.56 = 0.44
Value of call option:
= 5.08 (value if price goes up)
= 0.24 (value if price goes down)
99

= 2.86 ( value of option today)
HINT: value of and used for calculation of C are taken from above formula calculation
Where = 5.08 and = 0.24
Number of units of underlying for each unit of option.
= 0.6453 (no. of units at spot price)
= 1.00 (when price goes up)
= 0.0659 (when price goes down)
The number of units of the underlying required for 10,000 calls would thus be 6,453 today,
10,000 at time 1 if the underlying is at 34.20, and 659 at time 1 if the underlying is at 26.70.
Putting the values in the tree:
S+ + = 39.98
C+ + = 8.99
S+ = 34.20
= 0.56 C+ = 5.08 S+ ¯ = 30.44 or S¯ +
C+ ¯ = 0.44 or C¯+
S0 = 30 S¯ + = 30.44
C = 2.86 C¯+ = 0.44
1- .44 S¯ = 26.70
C¯ = 0.24 S¯ ¯ = 23.76
C¯ ¯ = 0
THE BLACK-SCHOLES-MERTON MODEL

BLACK-SCHOLES-MERTON MODEL or Continuous model can be divided in two
categories.
a. Black-Schole Model b. Merton Model
When we move to a continuous-time world, we price options using the famous Black-Scholes-
Merton model. Named after its founders Fischer Black, Myron Schole: and Robert Merton.
The model can be derived either as the continuous limit of the binomial model, or through
taking expectations, or through a variety of highly complex mathematical procedures.
100

Black-Schole Model gives a closed-form solution for the price of a European option on a non-
dividend stock while Merton model provides a solution for the price of a European option on a
stock paying a continuous dividend.
ASSUMPTIONS OF THE MODEL:

1. The underlying price follows a log normal diffusion process.
This assumption is probably the most difficult to understand, but in simple terms, the
underlying price follows a lognormal probability distribution as it evolves through time
Log returns are often called continuously compounded returns. If the log or continuously
compounded return follows the familiar normal or bell-shaped distribution, the return is said to
be log normally distributed.
2. The risk free rate is known and constant.

The Black-Scholes-Merton model does not allow interest rates to be random. Generally, we
assume that the risk-free rate is constant. This assumption becomes a problem for pricing
options on bonds and interest rates, and we will have to make some adjustments then.
3. The volatility of the underlying is known and constant.

The volatility of the underlying asset, specified in the form of the standard deviation of the log
return, is assumed to be known at all times and does not change over the life of the option.
This assumption is the most critical. In reality, the volatility is definitely not known and must
be estimated or obtained from some other source. In addition, volatility is generally not
constant. Obviously, the stock market is more volatile at some times than at others.
Nonetheless, the assumption is critical for this model.
4. There are no taxes and transaction cost.

We have made this assumption all along in pricing all types of derivatives. Taxes and
transaction costs greatly complicate our models and keep us from seeing the essential financial
principles involved in the models. It is possible to relax this assumption, but we shall not do so
here.
5. There no cash flows on the underlying.

There are no any cash flows like dividend on the securities during the period.
6. The options are European.
With only a few very advanced variations, the Black-Scholes-Merton model does not price
American options. Users of the model must keep this in mind, or they may badly misprice
these options.
Black-Scholes-Merton formula:
The input variables are some of those we have already used: So is the price of the underlying,
X is the exercise price, rC is the continuously compounded risk-free rate, (that is ln of r) and T
is the time to expiration. The one other variable we need is the standard deviation of the log
return on the asset. We denote this as and refer to it as the volatility.
HINT: r is always used after calculating natural log of r. that is , rc = ln(1+r)

101

Black-Scholes-Merton formulas for the prices of call and put options are:-
-rT
Call option value, C= S0 N(d1) Xe N(d2)
rT
Put option value, P = Xe- S0
After simplifying formula for put option is:
rT
P = Xe- S0 + C
d2 = d1
N(d1) = Value of d1 from normal distribution table.

N(d2) = Value of d2 from normal distribution table.
Put-Call Parity.
In financial mathematics, put call parity defines a relationship between the price of
a European call option and European put option, both with the identical strike price and
expiry, namely that a portfolio of a long call option and a short put option is equivalent to (and
hence has the same value as) a single forward contract at this strike price and expiry.
In simple when we calculate the price of put option through price of call option, it is called
put-call parity.
NORMAL DISTRIBUTION:
102

103

Example 26: (Black-Scholes-Merton Model)
Use the Black-Scholes-Merton model to calculate the prices of European call and put options
on an asset priced at 52.75. The exercise price is 50, the continuously compounded risk-free
rate is 4.88 percent, the options expire in 9 months, and the volatility is 0.35. There are no cash
flows on the underlying.
Solution:
2 c
=0.0488
-rT
rT
First calculate d1 and d2.
= 0.4489 = 0.45
d2 = d1 d2 = 0.45 0.35 (0.87) = 0.1455 = 0.15
N(d1) = Value of d1, 0.45 from normal distribution table. = 0.6736

N(d2) = Value of d2, 0.15from normal distribution table. = 0.5596
-(.0488)(.75)
Call option value, C= 52.75(.6736) -50 e .5596
C = 35.50 48.20 (.5596) = 8.53
rT
Put option value, P = Xe- S0 + C
-(.0488)(.75)
P = 50 e 52.75+8.53
P = 48.2 52.75 + 8.53 = 3.98
Merton Model:
Merton added the concept of interim cash flows. He said that we can calculate the value
of option even if there are some cash flows involved. E.g. dividends. The only difference
between Black-Schole and Merton is the calculation of So. For Merton model So is denoted as
So/ and is calculated by:-
-rT
So/ = So e = whereas r is the rate of dividend on stock.
Example 27:
So = 100 T = 180/365 Dividend rate = 8%
-rT
So/ = So e = 100 e-(.08)(180/365) = 103.98
The formula will be same as Black-Schole model. Only change is, we use value
of So/ instead of So.
104

OPTION SENSITIVITIES
Determinants of option price / factors influencing option price.
Following are the five factors or inputs of Black-Schole-Merton Model, that influence the
price of options to change.
1. The underlying price. (Delta & Gamma)

2. The exercise price.
3. The risk free ratio. (RHO)
4. Time to expiration. (Theta)
5. Volatility. (Vega).
Now, we explore, what is the response of option price to these factors that determine the price.
The option price sensitivities all derive from calculus. For example, the sensitivity of
the option price with respect to the stock price is simply the first derivative of the option
pricing formula with respect to the stock price. The first derivative of the call price with
respect to the stock price is just the change in the call price for a change in the stock price.
These sensitivities are calculated through Greeks.
GREEKS
In mathematical finance, the Greeks are the quantities representing the sensitivity of the price
of derivatives such as options to a change in underlying parameters on which the value of an
instrument or portfolio of financial instruments is dependent. The name is used because the
most common of these sensitivities are denoted by Greek letters (as are some other finance
measures). Collectively these have also been called the risk sensitivities, risk measures
or hedge parameters.
USE OF THE GREEKS

The Greeks are vital tools in risk management. Each Greek measures the sensitivity of the
value of a portfolio to a small change in a given underlying parameter, so that component risks
may be treated in isolation, and the portfolio rebalanced accordingly to achieve a desired
exposure; see for example delta hedging.
The Greeks in the Black Scholes model are relatively easy to calculate, a desirable property
of financial models, and are very useful for derivatives traders, especially those who seek to
hedge their portfolios from adverse changes in market conditions. For this reason, those
Greeks which are particularly useful for hedging--such as delta, theta, and vega--are well-
defined for measuring changes in Price, Time and Volatility. Although rho is a primary input
into the Black Scholes model, the overall impact on the value of an option corresponding to
changes in the risk-free interest rate is generally insignificant and therefore higher-order
derivatives involving the risk-free interest rate are not common.
105

1. Del
= N (d1)
2.
Change in option premium due to change in time to expiration is called a
= - r x e-rT N(d2)
3. Vega
Change in option premium due to change in risk or volatility is called a
= S0
4. Rho
Change in option premium due to change in risk free rate is called
= x T e-rT N(d2)
5.
Change in option premium due to change in Delta is called
Whereas:-
-0.5 (d1)2
e
22/7 or 3.142
Effect of sensitivities on call and put option premiums
DIRECTOIN CALL OPTOIN PUT OPTION

Increase in spot price Increase Decrease
Increase in exercise price Decrease Increase
Increase in risk free rate Increase Decrease
Decrease / passing time to expiry Decrease Increase
Increase in volatility Increase decrease
106

Example 28:
Suppose spot price for an underlying is 100, exercise price is 100, compounded risk free is
8%, volatility is 30% and time is 180 days. Calculate all the sensitivities.
Solution:
2 c
S0 =0.08
-(.08)(.5) rT
e = 0.9608 Xe- = 100e-(.08)(.5) = 96.08
-rT
rT
= 0.29
d2 = d1 d2 = 0.29 0.30 (0.70) = 0.08

Call option value, C= 100(.6141) 96.08 (.5319) =

C = 61.41 51.10 = 10.31
rT
P = 96.08 100 + 10.31 = 6.39
HINT: Sometimes the value of d1 may be negative. In this case the calculation will be done
using this formula. Suppose in above case delta is -.29
N(-d) or 1 N(d) where N(d) = .6141 and 1 .6141 = .3859 now d1 = 0.39
Sensitivity measures:
1.
= N (d1) = .6141
2.
= - r x e-rT N(d2)
Whereas:-
107

-0.5 (0.29)2
e = (.9588) = 0.40(0.9588) = 0.3835
= - .08(96.08)(.5319) = -8.14 4.08 = -12.22
3. Vega
= S0 35) = 26.85
4. Rho
= x T e-rT N(d2) = 100(.50)(.96)(.5319) = 25.53
5.
= = = .018
Changes in values.
Call option is 10.31 and the spot price is 100. Calculate the changes.
1. Change in delta due to change in spot price. (Delta through Gamma) = .6141
New price is 101, old was 100.
.018 = .6321
New C = 10.31 + . 6141 = 10.92

2. Change in call option premium due to change in expiry. (Theta) = -12.22
It is 37 days from start of period, t=180 = 37/365 = 0.1014
New C = 10.31 + .1014(-12.22) = 9.07
3. Change in call option premium due to change in risk / volatility. (Vega) = 26.85
New C = 10.31 + .1(26.85) = 12.98

(call premium increases due to increase in risk)
4. Change in call option premium due to change in risk free rate (Rho). = 25.50
Risk free increases by 1%.
New C = 10.31 + .01(25.50) = 10.55
108

EXAMPLE 29: Assignment No. 3
Schlumberger Limited (SLB)

Monthly data for the period of 2014-2015
MONTH PRICE
April-15 99.74 R
May-15 102.2 0.024
June-15 116.3 0.129 S.D. 0.0786
July-15 106.9 -0.085 Annualized S.D. 0.2722
August-15 108.5 0.015 0.741
September-15 100.6 -0.075 r 0.08
October-15 97.63 -0.03 ln(1+r) 0.077
November-15 85.05 -0.138 So 94.61
December-15 84.91 -0.002 X 104.07
January-15 81.91 -0.036 T 180/365
February-15 84.16 0.027 T 0.5
March-15 83.44 -0.009 0.71
April-15 94.61 0.126
Solution:
2 c
S0 =0.077
-(.077)(.50) rT
X = So + 10% = 104.07 e = .9622 Xe- = 104.07e-(.077)(.50) = 100.14
-rT
rT
rT
OR P = Xe- S0 + C
= = 0.67
d2 = d1 d2 = 0.67 0.27 (0.71) = 0.48

109

Call option value,
-rT
C= S0 N(d1) Xe N(d2)
C= 94.61(.7486) 100.14 (.6844) =
C = 70.82 68.53 = 2.28
rT
P = 100.14 94.61 + 2.28 = 7.81
Sensitivity measures:
1.
= N (d1) = 0.7486
2.
= - r xe-rT N(d2)
Whereas:-
-0.5 (d1)2
e
-0.5 (0.67)2
e = (.7153)
0.40(0.7153) = 0.2861
= - .077(100.14)(.6844)
= - .077(100.14)(.6844) = - 5.14 5.27 = -10.42
3. Vega
= S0 = 19.22
4. Rho
= x T e-rT N(d2) = 100.14(.50)(.96)(.6844) = 32.90
5.
= = = .016
110

Binomial and Black Scholes - 111153

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Dura on:

YEAR CASH FLOWS PVF = 1/ (1+i)n PV of CF PV of CF * t

a. Present value of Bond.

or whereas: t stands for me (year)

Convexity = - = -4.32 * = -.39 , -3.9%

Waseem A. Qureshi MM141063

Some basic calculations, signs & formulas and model:

Value of call option =

Calculate no. of underlying to be purchased or sold against one unit of option.

Waseem A. Qureshi MM141063

Following diagram illustrates this scenario, commonly known as a binomial tree.

Example 23: (One period binomial)

Option values at expiration:

Waseem A. Qureshi MM141063

Value of call option =

= 7.01 (Fair price of call option premium)

Calculate no. of underlying to be purchased or sold against one unit of option.

H = nS C = 556(50) - 1,000(8) = $19,800.

Example 24: (One period binomial)

Consider a one-period binomial model in which the underlying is at 65 and can go up 30

Waseem A. Qureshi MM141063

Option values at expiration:

The risk-neutral probability is

Value of call option =

= 7.75 (Fair price of call option premium)

Calculate no. of underlying to be purchased or sold against one unit of option.

H = nS C = 4290(65) - 10,000(9) = $188,850.

Waseem A. Qureshi MM141063

S0 = spot price current price of the underlying

(value of call option)

Waseem A. Qureshi MM141063

Example 25: (Two period binomial)

Option prices at expiration:

We will need the value of :

Value of call option:

= 5.08 (value if price goes up)

= 0.24 (value if price goes down)

Waseem A. Qureshi MM141063

= 0.6453 (no. of units at spot price)

= 1.00 (when price goes up)

= 0.0659 (when price goes down)

Putting the values in the tree:

THE BLACK-SCHOLES-MERTON MODEL

Waseem A. Qureshi MM141063

ASSUMPTIONS OF THE MODEL:

2. The risk free rate is known and constant.

3. The volatility of the underlying is known and constant.

4. There are no taxes and transaction cost.

5. There no cash flows on the underlying.

HINT: r is always used after calculating natural log of r. that is , rc = ln(1+r)

Waseem A. Qureshi MM141063

N(d1) = Value of d1 from normal distribution table.

Waseem A. Qureshi MM141063

Waseem A. Qureshi MM141063

First calculate d1 and d2.

d2 = d1 d2 = 0.45 0.35 (0.87) = 0.1455 = 0.15

N(d1) = Value of d1, 0.45 from normal distribution table. = 0.6736

Waseem A. Qureshi MM141063

1. The underlying price. (Delta & Gamma)

These sensitivities are calculated through Greeks.

USE OF THE GREEKS

Waseem A. Qureshi MM141063

Effect of sensitivities on call and put option premiums