Scribd Logo
Upload

Welcome to Scribd!

  • 003 Spreadsheet Solution (Approximate Derivative Price)

    Uploaded by

    Swapnil Singh
    2 views4 pages
    This document contains a table summarizing the price and Greeks of a derivative contract over time, as well as the contributions of each Greek to the change in the contract's value. It also notes that the approximated final price of 98.96 is close to the actual final price of 98.37, and that the approximation method works best for small parameter changes rather than a large change in r from 2% to 5% in one time step.

    Original Description:

    Original Title

    003 Spreadsheet Solution [Approximate derivative price]

    Copyright

    © © All Rights Reserved

    Available Formats

    XLSX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    This document contains a table summarizing the price and Greeks of a derivative contract over time, as well as the contributions of each Greek to the change in the contract's value. It also notes that the approximated final price of 98.96 is close to the actual final price of 98.37, and that the approximation method works best for small parameter changes rather than a large change in r from 2% to 5% in one time step.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    2 views4 pages

    003 Spreadsheet Solution (Approximate Derivative Price)

    Uploaded by

    Swapnil Singh
    This document contains a table summarizing the price and Greeks of a derivative contract over time, as well as the contributions of each Greek to the change in the contract's value. It also notes that the approximated final price of 98.96 is close to the actual final price of 98.37, and that the approximation method works best for small parameter changes rather than a large change in r from 2% to 5% in one time step.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 4

    Approximate derivative price

    T 1

    t 0 0.2 0.4 0.6 0.8 1


    St 10 9.764 9.794 9.633 9.748 9.918
    s 10% 10.20% 10.40% 10.60% 10.80% 11.00%
    r 2% 2.00% 5.00% 5.00% 5.00% 5.00%

    Vt 103.05 97.68 99.48 95.10 96.21 98.37 (S1)2 98.37

    The Greeks
    Delta 20.60909 20.0089238 20.3154344 19.74367 19.73884
    Gamma 2.060909 2.04924284 2.07432703 2.049594 2.024818
    Rho 103.0455 78.1473082 59.6892679 38.03802 19.2423
    Vega 20.60909 15.9420509 12.4153677 8.06406 4.156337
    Theta -3.091364 -2.9699884 -6.0501042 -5.82324 -5.932786

    Contributions to the change in contract value


    Delta -4.862572 0.59406846 -3.2663285 2.280027 3.348801
    Gamma 0.057365 0.00090321 0.02681111 0.013667 0.02914
    Rho 0 2.34441924 0 0 0
    Vega 0.041218 0.0318841 0.02483074 0.016128 0.008313
    Theta -0.618273 -0.5939977 -1.2100208 -1.164648 -1.186557

    dVt -5.382262 2.37727732 -4.4247075 1.145174 2.199697


    Vt 103.05 97.66 100.04 95.62 96.76 98.96
    Approximate derivative price
    (ii) These quantities are equal:
    V1 98.37
    (S1)2 98.37

    (v) The approximate value of 98.96 is close to the actual value of 98.37.

    (vi) The method of approximating future values is only accurate for small changes in the parameter values.
    Changing r from 2% to 5% is too great in one time step.
    Accuracy might be improved by including the second-order partial derivative with respect to rho.
    However, the sharp discontinuity in r is likely to prove too steep to model effectively in this way.
    parameter values.

    pect to rho.

    You might also like