Greeks

The sensitivities of an option's value to its inputs, namely delta, gamma, vega, theta and rho. Traders use them to measure and hedge risk.

Where you will meet it

Greeks comes up in 4 learning outcome notes across the FRM syllabus. A few of them:

• Option Sensitivity Measures: The “Greeks”
  FRM Part I · Valuation and risk models

  “The position is neutral only locally, so both Greeks drift with price and time and must be rebalanced.”

• Volatility Smiles and Volatility Surfaces
  FRM Part II · Market risk measurement and management

  “Black-Scholes-Merton Greeks assume constant volatility.”

• Option Sensitivity Measures: The “Greeks”
  FRM Part I · Valuation and risk models

  “The Greeks are tied together by the Black-Scholes-Merton differential equation, which can be written as Theta = r × V − r × S × Delta − ½ × σ² × S² × Gamma.”

• Option Sensitivity Measures: The “Greeks”
  FRM Part I · Valuation and risk models

  “A portfolio's Greeks are the position-weighted sums of the individual Greeks.”

See also

Delta · Gamma · Option

All terms beginning with G · FRM glossary

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