NISM Series XIII Common Derivatives Certification Exam Notes
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Option Greeks: Delta: Sensitivity of premium to price change of underlying.Gamma: Rate of change of delta.Theta: Sensitivity to time decay.Vega: Sensitivity to volatility. Rho: Sensitivity to interest rate changes.
Put-Call Parity: Relationship between European call and put prices:
C + PV(X) = P + S
Option Pricing Models: Binomial Model: Uses price trees; suitable for European & American options. Black-Scholes Model: Calculates theoretical price; quick but assumes continuous hedging.
Black-Scholes Formula (for European options):C = SN(d1) – Xe^(-rt)N(d2)
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