"For the underlying asset, S_t, V=0" Is this because we assume the underlying asset S_t is independent of volatility, sigma?
Vega Hi Jensen, When the share price changes more dramatically than it has done in the past, it would be recorded in sigma increasing - ie, the underlying volatility of the asset has increased. Or is it that the underlying volatility has increased and then the share price changed? Chicken and egg situation? The truth is that they happen at the same time, by definition of sigma. So, if sigma changes, this means that the propensity of the share to move a lot in the future has increased but this doesn't mean that its current price should change. Hence Vega = 0 for a share. Good luck! John
I have been reading what John said, and it got me to think if there is similar argument if say i asked, for a share, what is its: a) rho b) lambda c) theta My initial guess is they're all zero, but I wasn't sure of the lambda. What do you think?
geez, u got me a bit lost there. Now i dont know if the a) b) and c) i asked are real quantities or estimates. Share prices do change with time, or is it time that changes the share prices? (i feel ridiculous) If r increases, I would just put it in the bank and not in the stock market, so I agree with you with. I dont know much how stocks work so I'm gonna give the dividend one to you. Cheers!
