Greeks Remark

As quoted in the remarks of the MFE exam:

Greeks
Greeks are partial derivatives of the option price formula. “The actual formulas
for the Greeks appear in Appendix 12.B” (McDonald 2006, p. 382). As the author
seemed to want to avoid using calculus in the first half of his book, the definitions given
on pages 382 and 383 are numerical approximations. We need to be careful about the
units in which changes are measured. For example, it is stated on page 383 that “[t]heta
(θ) measures the change in the option price when there is a decrease in the time to
maturity of 1 day.” However, the mathematical definition for theta is the partial
derivative of the option price with respect to t. In the Black-Scholes option-pricing
formula, the variable t is (usually) in years. Thus, the definition on page 383 differs from
the partial-derivative definition by a factor of 365.

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