Page 78 - PRIAA Glossary
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G20 COMMITMENTS (OTC DERIVATIVES)
A reference to the series of commitments that were constructed to improve over-the-counter (OTC) derivatives market transparency during the G20 Pittsburgh Summit in 2009. The group made the commitment to improve the OTC derivatives markets by implementing compulsory trading on exchange or electronic platforms, clearing, reporting to a trade repository and changes to capital requirements.
GAMMA
The rate of change in the delta of an option with respect to the change in price of the underlying instrument, keeping all other factors constant.
The equation below illustrates the mathematical formulation for gamma, where V is the value of the option, S is the price of the underlying and Δ is the option delta:
2 ∂∆ ∂V
Γ= =
∂S ∂S2
GAP OPTION
A form of binary option with a strike price greater than the payoff strike. The difference between the strike and payoff strike is called the “gap”. Also known as a “pay-later option”.
GARMAN-KOHLHAGEN MODEL
A variation of the Black-Scholes option pricing model, used to price European FX options. Additional terms include the risk-free rate of the foreign currency and the risk-free rate of the domestic currency.
GAS FIELD
A field that contains only natural gas—no oil.
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