Derivative: Difference between revisions
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imported>Doug Williamson (Explain link with Greek letters in option value analysis.) |
imported>Doug Williamson (Add link.) |
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2. | 2. ''Maths''. | ||
''Maths''. | |||
A derivative function describes the rate of change of the underlying function, with respect to changes in one of the variables in the underlying function. | A derivative function describes the rate of change of the underlying function, with respect to changes in one of the variables in the underlying function. | ||
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* [[Embedded derivative]] | * [[Embedded derivative]] | ||
* [[Greeks]] | * [[Greeks]] | ||
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Revision as of 23:42, 17 December 2020
1.
Abbreviation for derivative financial instrument.
2. Maths.
A derivative function describes the rate of change of the underlying function, with respect to changes in one of the variables in the underlying function.
- The first derivative describes the slope of the function curve at a given point on the curve.
- The second derivative describes the rate of change of the slope. In other words the degree of curvature, at a given point.
Most of the 'Greek letters' in options analysis are the first derivative of the option value, as the related value driver changes.
