List and explain three "Greek" elements and impacts on a call option premium

Question

What will be an ideal response?

Answer 1

Answer: 1) Delta: is the expected change in the option premium for a small change in the spot rate. The higher the delta, the more likely the option will move in-the-money. 2) Theta: is the expected change in the option premium for a small change in time to expiration. Premiums are relatively insensitive until the final 30 or so days. 3) Lambda: is the expected change in the option premium for a small change in volatility. Premiums rise with increases in volatility. 4) Rho: Expected change in the option premium for a small change in the domestic interest rate. Increases in domestic interest rates cause increasing call option premiums. 5) Phi: Expected change in the option premium for a small change in the foreign interest rate. Increases in foreign interest rates cause decreasing call option premiums.