S
sesamy5
Member
Hi,
This question looks at working out the change in an option price over a small period of time given the values of the Greeks and some starting parameters.
I am confused by the solution which gives that the change caused by gamma is
1/2 * gamma * dS^2
where has the factor of 1/2 come from?
I guess it's to with it being a 2nd derivative, but I don't see how this was arrived at. Would ^(1/2) also be valid?
Does anyone know?
Thanks
This question looks at working out the change in an option price over a small period of time given the values of the Greeks and some starting parameters.
I am confused by the solution which gives that the change caused by gamma is
1/2 * gamma * dS^2
where has the factor of 1/2 come from?
I guess it's to with it being a 2nd derivative, but I don't see how this was arrived at. Would ^(1/2) also be valid?
Does anyone know?
Thanks