Chapter 13 Portfolio Greeks
Traders have a choice to look at each trade individually, or as a whole. Looking at the investment portfolio as a whole is usually the more profitable choice, but requires an understanding of how the Greeks operate and how to evaluate aggregate Greeks. This chapter discusses how portfolio Greeks add up, and the proper calculation of vega.
All deltas are not the same. This is because delta is not weighted. You can be long 100 deltas of AAPL and long 100 deltas of Bank of America (BA), yet the exposure is different because of the price and volatility of each stock. This is where the concept of beta weighting comes into play. Beta weighting a portfolio to a base index is key. This is a practice engaged in by many ...
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