The Reconciliation of the Smith's and Jarrow and Rudd's Option Sensitivity Formulae: A Teaching Note

Daniel F S Choi and Charles Ward

The Financial Review, 1989, vol. 24, issue 3, 507-10

Abstract: Clifford W. Smith, Jr. (1976) and Robert A. Jarrow and Andrew Rudd (1983) have presented different expressions for the same option sensitivities. With the mathematical derivations omitted, the apparent differences have never been explained before. This note points out that an important identity can reconcile the differences. The usefulness of the identity is further explored. Copyright 1989 by MIT Press.

Date: 1989
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