Greeks

In mathematical finance, the Greeks are the quantities representing the sensitivities of derivatives such as options to a change in underlying parameters on which the value of an instrument or portfolio of financial instruments is dependent. The name is used because the most common of these sensitivities are often denoted by Greek letters. Collectively these have also been called the risk sensitivities, risk measures or hedge parameters. The Gree... more

In mathematical finance, the Greeks are the quantities representing the sensitivities of derivatives such as options to a change in underlying parameters on which the value of an instrument or portfolio of financial instruments is dependent. The name is used because the most common of these sensitivities are often denoted by Greek letters. Collectively these have also been called the risk sensitivities, risk measures or hedge parameters. The Greeks are vital tools in risk management. Each Greek measures the sensitivity of the value of a portfolio to a small change in a given underlying parameter, so that component risks may be treated in isolation, and the portfolio rebalanced accordingly to achieve a desired exposure; see for example delta hedging. The Greeks in the Black-Scholes model are relatively easy to calculate, a desirable property of financial models, and are very useful for derivatives traders, especially those who seek to hedge their portfolios from adverse changes in... less