Les “Grecques” in financial markets are a set of sensitivity measures that quantify the risk associated with holding a derivative, particularly an option. They measure how the price of an option changes in response to changes in underlying factors. Understanding and managing these Greeks is crucial for effective risk management, hedging, and speculative trading.
The most commonly used Greeks are:
- Delta (Δ): This measures the sensitivity of the option’s price to a change in the price of the underlying asset. A delta of 0.5 means that for every $1 change in the underlying asset’s price, the option’s price is expected to change by $0.50. Delta ranges from 0 to 1 for call options and -1 to 0 for put options.
- Gamma (Γ): This measures the rate of change of delta with respect to changes in the price of the underlying asset. It indicates how much delta is expected to change for every $1 move in the underlying asset. A high gamma indicates that the delta is highly sensitive, requiring frequent adjustments to hedging positions.
- Theta (Θ): This measures the time decay of the option’s value. It shows how much the option’s price is expected to decrease each day as it approaches its expiration date. Theta is typically negative for options, indicating a loss of value due to the passage of time.
- Vega (ν): This measures the sensitivity of the option’s price to changes in the volatility of the underlying asset. A vega of 0.10 means that for every 1% change in volatility, the option’s price is expected to change by $0.10. Options are generally more sensitive to volatility closer to their strike price and further from expiration.
- Rho (ρ): This measures the sensitivity of the option’s price to changes in interest rates. It indicates how much the option’s price is expected to change for every 1% change in interest rates. Rho is typically smaller than the other Greeks.
Beyond these primary Greeks, other, less commonly used Greeks exist, such as Vomma (volatility of Vega), Veta (time decay of Vega), and Chi (sensitivity to the cost of carry).
Practical Applications:
- Hedging: Traders use Greeks to construct hedges that offset the risk associated with their option positions. Delta-neutral hedging, for example, aims to create a position with a delta of zero, making it relatively insensitive to small movements in the underlying asset.
- Speculation: Greeks can be used to speculate on specific market movements. For example, a trader expecting a significant increase in volatility might buy options with high Vega.
- Risk Management: Portfolio managers use Greeks to assess the overall risk of their option portfolios and to ensure that they are within their risk tolerance levels.
- Pricing and Valuation: Greeks are derived from option pricing models like Black-Scholes and are used to evaluate the fairness of option prices.
In summary, the Greeks provide a powerful set of tools for understanding and managing the risks and rewards of trading options. They allow market participants to quantify the sensitivities of option prices to various factors and to make informed decisions about hedging, speculation, and risk management. By carefully analyzing and monitoring the Greeks, traders and investors can navigate the complexities of the options market and improve their overall performance.
1280×720 les banques grecques devraient recevoir rapidement milliards deuros from www.lesechos.fr 
1600×1154 greek finance stock photo image exchange greece from www.dreamstime.com 
480×666 le cas grec la finance pour tous from www.lafinancepourtous.com