The Greek Letters. Scenario Analysis with a Reverse Butterfly Spread

Muhammad Mustafa Rashid

MPRA Paper from University Library of Munich, Germany

Abstract: The management of risk is the goal of a financial institution that sells an option to a client in the over-the-counter markets. In addition to monitoring risks such as Delta(Δ), Gamma (γ) and Vega(v), option traders often also carry out, a scenario analysis. The analysis involves calculating the gain or loss on their portfolio over a specified period under a variety of different scenarios. The time period chosen is likely to depend on the liquidity of the instrument. The scenarios can either be chose by management or generated by a model.

Keywords: Financial Institutions; Scenario Analysis; Risk Management; Portfolio Management; Reverse Butterfly Spread. (search for similar items in EconPapers)
JEL-codes: G10 G11 G17 G2 H2 (search for similar items in EconPapers)
Date: 2020-03-19, Revised 2020-05-19
New Economics Papers: this item is included in nep-rmg
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