G
Gareth
Member
i've been learning how to set these up, as they appear in CID papers, am i wasting my time, or can the examiner easily ask us about these, as they are a key part of Hull?
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M
mtm
Member
Hi Gareth
Judging from the two previous ST6 exam papers there is a good chance of this type of question again. The gamma and delta graphs that are associated with combinations and spreads are also important judging from the previous St6 papers.
Judging from the two previous ST6 exam papers there is a good chance of this type of question again. The gamma and delta graphs that are associated with combinations and spreads are also important judging from the previous St6 papers.
G
Gareth
Member
i guess so, it's a strange exam, given how the core reading and acted notes are so thin, yet the exams seems to cover so many extra topics.
J
jonbon
Member
Hi Folks!!
Hull gives only payoff diagrams for these combinations..anywhere i can confirm my delta/gamma/theta/vega diagrams at various expiry terms?
Cheers.
Hull gives only payoff diagrams for these combinations..anywhere i can confirm my delta/gamma/theta/vega diagrams at various expiry terms?
Cheers.
M
mtm
Member
Hi jon bon
I'm not too sure. I have a few derivative books: Hull, Willmott (Paul Wilmott introduces quantitative finance") and Rennie but I didn't seem to find any combination deltas etc. graphs. But the St6 exams do seem to ask questions on them...
So I think I'll join you to ask the others this question....
I'm not too sure. I have a few derivative books: Hull, Willmott (Paul Wilmott introduces quantitative finance") and Rennie but I didn't seem to find any combination deltas etc. graphs. But the St6 exams do seem to ask questions on them...
So I think I'll join you to ask the others this question....
J
jonbon
Member
am really struggling with the delta/gamma payoff on a butterfly/calendar spread..any help...please
C
ChrisR
Member
jonbon said:Hi Folks!!
Hull gives only payoff diagrams for these combinations..anywhere i can confirm my delta/gamma/theta/vega diagrams at various expiry terms?
Cheers.
If you've got Hull (and access to excel) you can use the DerivaGem spreadsheet functions to graph out options combinations to your heart's content...
...which is of course an excellent distraction from reading notes or doing questions - but not quite as good a distraction as reading forums.
C
G
Gareth
Member
to be honest, after setting up an excel spreadsheet to draw the greeks for butterfly spread, bull spread etc etc, I have sort of come to the conclusion, that it's unreasonable for the examiner to expect these to be drawn on the spot - I mean I cannot see a way of intuitively drawing say gamma for a butterfly spread...
just seems beyond the syllabus to me.
just seems beyond the syllabus to me.
C
ChrisR
Member
I don't know - to be honest I find the gamma diagrams easier than the P&Ls !
With gamma there is only the one shape - the same for calls and puts. All the weird options they could get you to do are linear combinations of these, so I just draw the seperate gammas (with appropriate translation for different strikes and "squashing" for different terms) then roughly add them together.
I'm personally holding out for the last question in April to be a 25 marker on drawing gammas... More likely it will be a 50 marker asking us to "discuss" the pricing of calls on puts on pork futures in another currency, using the price of weather derivatives as numeraire, all written in ancient greek. I expect that a well prepared candidate could apply the prinicples of the core reading to get most of the marks on offer.
With gamma there is only the one shape - the same for calls and puts. All the weird options they could get you to do are linear combinations of these, so I just draw the seperate gammas (with appropriate translation for different strikes and "squashing" for different terms) then roughly add them together.
I'm personally holding out for the last question in April to be a 25 marker on drawing gammas... More likely it will be a 50 marker asking us to "discuss" the pricing of calls on puts on pork futures in another currency, using the price of weather derivatives as numeraire, all written in ancient greek. I expect that a well prepared candidate could apply the prinicples of the core reading to get most of the marks on offer.
G
Gareth
Member
haha yeah it's those strange wordy questions that I live in fear of...
I think i've got the hang of drawing the gamma, delta graphs for weird contracts now.
Playing with them in Excel really helped me.
I think i've got the hang of drawing the gamma, delta graphs for weird contracts now.
Playing with them in Excel really helped me.
J
jonbon
Member
ChrisR said:If you've got Hull (and access to excel) you can use the DerivaGem spreadsheet functions to graph out options combinations to your heart's content...
...which is of course an excellent distraction from reading notes or doing questions - but not quite as good a distraction as reading forums.
C
I've got ver 4 of Hull's DerivaGem software...but it only gives the basic Call/Put stuff...no combination....are all combinations in ver 5 ?
G
Gareth
Member
dont think so. i made my own spreadsheet to do these (coded the greeks and pricing functions in vba)