2014 Syllabus - CT8

Apart from adding behavioral finance and reducing Wilkie content, have proofs for the Greeks also been included in CT8? I recollect that was part of the ST6 syllabus. I do appreciate this was asked in 2011, but this year's CMP Upgrade for Assignments specifically included a couple of proofs.

I'd just like to confirm, thanks in advance.

 

Hmm...given the syllabus just says

you would think not. I would take a cue from the Core Reading, though - if it includes derivations I would not trust the examiners not to ask about them. They do have a habit of going off-piste and then justifying it with excuses like "well prepared candidates should have been equipped to handle..."

 

Although the derivations of the Greeks for a European call option now appear in ST6 and not in CT8, you were asked to derive the formula for delta in April 08 Q11 and for vega in Sept 08 Q9. Delta might also have come up again since, though I cannot recall in which question. However, and for what it's worth, these derivations haven't been asked in the last three years or so.

If I was sitting the exam this time around, I would learn the formulae for delta for a European calls and puts, which are given on p21 of Chapter 14 in the Course Notes, but not the derivations - which are long and involved.

Note also that gamma for both is equal to: exp[q(T-t)]*phi(d1)/[St*sigma*(T-t)^0.5], where phi(*) is the pdf of the standard normal as per page 10 in the Tables.

These may be useful if you need to calculate delta and gamma for hedging purposes.

 

Thank you for getting back to me.

Yes, although the results of the proofs are very well within the syllabus, Page 16 of this year's CMP Upgrade has the entire proof for vega !

I do understand what you're saying though, thank you for your time.