In the absence of an explicit formula, we can estimate the change in the option price due

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In the absence of an explicit formula, we can estimate the change in the option price due to a change in an input-such as σ-by computing the following for a small value of :
In the absence of an explicit formula, we can estimate

a. What is the logic behind this calculation? Why does need to be small?
b. Compare the results of this calculation with results obtained from BSCallVega.

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Derivatives Markets

ISBN: 9789332536746

3rd Edition

Authors: Robert McDonald

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