What Are The Greeks?
If you are interested in trading and investing stocks, you might have heard the Greeks mentioned once or twice and may be wondering who or what these Greeks are. The Greeks are just the name given to the quantities representing the sensitivities of the price of derivatives to a change in the parameters on which the value of the instrument is dependent. In other words, the Greek are a way of measuring risk management. Each Greek will measure the sensitivity of the value of the portfolio to ONE small change in a given parameter. This is an extremely useful tool in risk management because when it allows for each risk to be dealt with separately and therefore the whole portfolio can then be rebalanced accordingly. The Greeks are a product of the Black-Scholes model. This is a mathematical model of a financial market which is used for pricing equity options. The model is designed to price an option as a function of certain variables. Before the Black-Scholes model was discovered, by Fischer
