Munich Personal RePEc Archive

The Greek Letters. Scenario Analysis with a Reverse Butterfly Spread.

Rashid, Muhammad Mustafa (2020): The Greek Letters. Scenario Analysis with a Reverse Butterfly Spread.

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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(), Gamma () 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.

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