Jan

23

Charm, from Kim Zussman

January 23, 2013 |

 "Charm" (decay of option sensitivity to underlying over time) seems an apt model for the decline in male sex drive with age, and the attendant increased attention to youth. Further calculations are required to examine the effects of being in the money, and time-related sensitivity to volatility.

Charm or delta decay, measures the instantaneous rate of change of delta over the passage of time. Charm has also been called DdeltaDtime. Charm can be an important Greek to measure/monitor when delta-hedging a position over a weekend. Charm is a second-order derivative of the option value, once to price and once to the passage of time. It is also then the derivative of theta with respect to the underlying's price.


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