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andrepoorman
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Joined: August 4th, 2011, 8:01 pm

Spread Option Analytical Greeks

August 8th, 2011, 1:09 pm

Hi,where can I find formulas for the analytical Greeks of a Spread Option valued using Black(1976) with Kirk?s Approximation?I have, I think, for F1=28, F2=20, K=7, v1=0.29, v2=0.36, R(correlation)=0.42, i=0.05, T=0.25AndF = F1/(F2+K) = 1.04v = ( v1^2 + [v2* F2/(F2+K) ]^2 ? 2*R*v1*v2* F2/(F2+K) ) ^0.5 = 0.30d1 = [ ln(F) + (v^2/2) * T ] / (v * T^0.5) = 0.32d2 = d1 ? v * T^0.5 = 0.17then (for a call)DeltaA = N(d1) = 0.62DeltaB = - N(d2) = -0.56GammaA = N(d2)/ (F1 * v * T^0.5) = 0.13GammaB = N(d2)/ [ (K*exp(-i*T) + F2) * v * T^0.5] = 0.14CrossGamma = N(d1)/ [ (K*exp(-i*T) + F2) * v * T^0.5] = - 0.13 VegaA=? = 3.10?VegaB=? = 1.87?CrossVegaGamma=? = 0.01?Chi (aka Riga, Correlation Vega etc.) =? = -1.35?Theta=? = 3.04?Rho=? = -0.54?
 
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Randor
Posts: 80
Joined: October 8th, 2005, 8:33 am

Spread Option Analytical Greeks

November 11th, 2011, 9:18 pm

not sure... but - are you sure you want to use Kirk?i understand that it's not very good...here are some better ones...eg "Closed Form Spread Option Valuation - Bjerksund and Stensland"http://papers.ssrn.com/sol3/papers.cfm? ... ptions.pdf
 
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spursfan
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Joined: October 7th, 2001, 3:43 pm

Spread Option Analytical Greeks

November 12th, 2011, 12:16 pm

This is the one to usehttp://papers.ssrn.com/sol3/papers.cfm?abstract_id=952747
 
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Cuchulainn
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Spread Option Analytical Greeks

November 12th, 2011, 12:56 pm

QuoteOriginally posted by: spursfanThis is the one to usehttp://papers.ssrn.com/sol3/papers.cfm?abstract_id=952747general remarks,Why do many working papers contain notices like "Exhibit 1 approximately here"??
Last edited by Cuchulainn on November 11th, 2011, 11:00 pm, edited 1 time in total.
65000
 
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spursfan
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Joined: October 7th, 2001, 3:43 pm

Spread Option Analytical Greeks

November 12th, 2011, 4:10 pm

Some journals keep text and exhibits in separate files - and only combine the two files just before publication
 
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Gmike2000
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Joined: September 25th, 2003, 9:49 pm

Spread Option Analytical Greeks

November 15th, 2011, 2:48 pm

as if all those working papers are ever going to be published. it is a pain in the ass to read papers like that.