ASSESSMENT OF OPTION PRICE VOLATILITY

Abstract

Financial derivatives are becoming increasingly popular on a daily basis. As markets become more unpredictable, companies and individual investors are increasingly using these tools to manage risk, leverage, and increase investment returns. The most important aspect of any contract is the contract price, as the financial result of the contract depends on the price. Also for an options. In each case, the option price depends on many factors that are difficult to define and predict in advance. The price sensitivity of the option allows you to determine where and on what the option price depends. Knowing this, the investor can manage the risk of the options. The purpose of the article is to assess the sensitivity of different options to market factors based on scientific literature and real market data. The study uses the Black-Scholes option pricing model, calculating and analyzing the value of Greek letters for the determination and valuation of transaction price sensitivity. The study showed that the most sensitive to changes in the underlying asset price, volatility and risk-free interest rate is the price of the currency option, and the price of the gold option is most sensitive over time (although in theory, gold retains its value in the long run). Knowing which components a particular option is sensitive to and capable of predicting changes in those components, you can predict changes in the option price and avoid additional risk.