Greek characters are used to measure each of the factors that influence the premium of an option. These are formulas represented by Greek letters, and they measure each of the factors that affect a premium's sensitivity. These letters include: delta, gamma, theta, vega (or kappa), rho, and phi.
- Delta: Indicates how much an option's premium varies depending upon changes in the spot quote for the underlying asset. It calculates the premium's speed of change upon variation in the value of the underlying.
- Gamma: Shows how the option's delta changes according to variation in the spot quote, that is, it should represent the acceleration with which the option's premium varies depending upon changes in the spot price of the underlying asset.
- Theta: It demonstrates the way in an option's premium decreases as time passes towards its maturity date.
- Vega or kappa: Indicates how much the option's premium changes depending upon variation in the volatility of the underlying asset.
- Rho: Calculates how much an option's premium changes depending upon variation in the market interest rates coinciding with the option's term.
- Phi: Indicates how much an option's premium changes depending upon variation in dividend payment expectations for the underlying asset.
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