Greeks in dollars versus Greeks in percentage

pj · Post by pj » Tue Mar 05, 2019 1:50 pm

Hi,

There is a structurer asking me to convert the

Greeks (delta, gamma, theta) into percentage format

and refusing to explain what does that mean.

Googling and books didn't help.

Moreover the provided example numbers for delta

are positive in classical (as he terms them dollar)

and negative in percentage term. Therefore dividing the

delta by the notional is out.

So what is he talking about?

Maggette · Post by **Maggette** » Tue Mar 05, 2019 2:11 pm

Could you post the example he send you?

Embarrassing, but just rule out the stupid stuff:

If you have a Delta 0.5....he doesn't expect you to send 50? Like in 50%?

pj · Post by pj » Tue Mar 05, 2019 2:29 pm

Don't think it will be of any help,

but here there are the numbers.

PV -1,268,596.63

DELTA 1,749.50

DELTA_PERCENTAGE -0.222667258

GAMMA -11.2967495

VEGA -19,426,472.30

THETA 1,369.59

RHO 23,370,269.94

> If you have a Delta 0.5....he doesn't expect you to send 50? Like in 50%?

Sigh, there is a sign change, and the delta/delta_percentage makes

no sense to me.

I have repeatedly asked for the definition. Head against Wall

Maggette · Post by **Maggette** » Tue Mar 05, 2019 2:44 pm

Sorry, makes no sense to me either.

Last shot in the dark...change in delta from time t_k-1 to time t_k?

Edit: so basically not solveablewith the information in the example?

Sorry, No idea.

ronin · Post by **ronin** » Tue Mar 05, 2019 2:48 pm

It would be percentage of notional. The number in the termsheet.

Delta percentage could mean 0.22 basis points (modulo sign), in which case it is ~ 78 mln in notional. So 23 million rho and 20 million vega can make sense, depending on the maturity. Is this like a 30y trade?

But seriously, who hedges the delta to the fraction of a basis point and lets vega and rho run to tens of millions?

pj · Post by pj » Tue Mar 05, 2019 2:48 pm

> Sorry, No idea.

you feel my pain

It is an equity barrier. Dead

deeds · Post by **deeds** » Tue Mar 05, 2019 3:26 pm

Perhaps something from Haug, e.g. p 56, VegaP, GammaP as percentage change?

pj · Post by pj » Tue Mar 05, 2019 3:42 pm

It may be the notional (it may be negative)...

Proposed that.

Waiting him to respond.

ronin · Post by **ronin** » Tue Mar 05, 2019 10:50 pm

@pj,

Something I learned in my second month on an exotics desk (a long time ago).

Always, always make people email you their questions and requests.

Just the simple act of organising their thoughts enough to put them in an email eliminates 99% of stupid requests. And the last 1% is much less stupid.

chiral3 · Post by **chiral3** » Wed Mar 06, 2019 3:36 am

+1 for ronin.

All I can think of is he may have a term sheet from an institutional client with $delta, .... i.e., $ change given, say, a 1% change in underlying; so %delta ~= $delta*100/S0.