NISM Series XVI - Commodity Derivatives Exam Notes

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  • Theta (θ) is a measure of an option's sensitivity to time decay. Theta = Change in an option premium/ Change in time to expiry
  • Vega (ν) is a measure of the sensitivity of an option price to changes in market volatility.. Vega = Change in an option premium/ Change in volatility
  • Rho (ρ) is the change in option price given a one percentage point change in the risk-free interest rate. Rho = Change in an option premium/ Change in cost of funding the underlying
  • Premium (PM) = Intrinsic value (IV) + Time Value (TV)
  • There are 3 different ways of closing an option position: offset, exercise and expiration
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NISM Commodity Derivatives

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