African Journal of
Mathematics and Computer Science Research

  • Abbreviation: Afr. J. Math. Comput. Sci. Res.
  • Language: English
  • ISSN: 2006-9731
  • DOI: 10.5897/AJMCSR
  • Start Year: 2008
  • Published Articles: 252

Article in Press

Sensitivity Analysis Of Black-Scholes Formula Arising In Financial Mathematics

Hamza Abubakar

  •  Received: 27 June 2018
  •  Accepted: 15 December 2018
Options pricing without proper understanding of the sensitivities letters the essential measures of risk in option pricing theory and profit/loss guideposts in options pricing strategies is synonymous to flying a plane without the ability to study the instruments. Option pricing/valuation is complex activity in determining the pair price of derivative, as there are a lot of factors involved in the process which include: underlying price (S),strike price (K), time to maturity(T), risk free interest rate (r) , volatility This paper try provides simple derivations of Sensitivities (Greek) letters for European options within the Black-scholes model and also provide relationship between Delta, Theta, and Gamma that appear in the model. The proofs were relatively simple and easy to follow based on the model.

Keywords: Sensivitities, Black-Scholes , option pricing, Call option, Put option, Greek letters