ratio of vegas and ratio of gammas for same-expiry options

This forum is to discuss the book "the concepts and practice of mathematical finance" by Mark Joshi.

ratio of vegas and ratio of gammas for same-expiry options

Postby sunnyday » Fri Sep 13, 2013 9:38 am

Hello,

In chapter 4, p85, first paragraph, I see that "since A and B have the same expiry, the ratio of their vegas is the same as the ratio of their gammas". For put option, we could calculate its vega, but for digital put, do we have a closed form formula for vega? I'd really appreciate it if you could let me know how to prove the ratio of vegas is the same as ratio of gammas.

Thanks!
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Re: ratio of vegas and ratio of gammas for same-expiry options

Postby mj » Tue Sep 17, 2013 6:05 am

well you can differentiate to find the formula. Or approximate the digital call with a call spread.
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