Re: [Quantlib-users] Query on gamma

[Klaus S. <kl...@sp...>]

Hi Ashish,

the gamma is in absolute terms, meaning just the second derivative of the npv w.r.t. the underlying. By default QuantLib is using Crank-Nicolson scheme, which is fast but might give instable gammas for some ATM options. To stablize the gamma you can either use one or two damping steps or use the TrBDF2 scheme.

best regards
Klaus

On Donnerstag, 17. November 2022 13:31:29 CET Ashish Bansal wrote:


Hi,


I am calculating the option gamma using the following functions:engine = FdBlackScholesVanillaEngineProcess = BlackScholesMertonProcesspayoff = PlainVanillaPayoff with american optiongamma function = option.gamma()




For a few of the options, I am getting the gamma more than 1, up to 13. I want to know if the above function returns the gamma in percentage terms or decimal. Should I be dividing the gamma by 100 to get the correct value?


Regards,
Ashish