Part 6 Learn Institutional Trading

39
Black-Scholes Model

A widely used formula to calculate option prices using:

Stock price

Strike price

Time to expiry

Volatility

Risk-free interest rate

Greeks

Delta: Measures sensitivity of option price to underlying price changes.

Gamma: Measures delta’s rate of change.

Theta: Measures time decay of option.

Vega: Measures sensitivity to volatility.

Rho: Measures sensitivity to interest rates.

Understanding Greeks is critical for managing risk and strategy adjustments.

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