He has just woken up from a nightmare.
If this was a movie he would have sat up, opened his eyes and screamed, revealing to the viewer that we just witnessed a dream sequence, but Spiro’s eyes simply opened and he sighed quietly. Spiro’s sigh was so quiet that he needed to nudge Nikki to wake her from her slumber.
“What is it, reh?” she asked.
“I had a nightmare,” Spiro continued, “where I forget the alphabet.”
Nikki, who was surprisingly supportive for a fiancée who has just been awakened, asks Spiro to explain.
“I am about five years old and Mrs Patzikakis asks me to sing the Greek alphabet. When I finish the class starts laughing because I have left out some of the letters.”
“Spiro, you must be under a lot of pressure at work. Go back to sleep. It’s just a silly dream, and to prove it, why don’t you sing the Greek alphabet to me?”
While it seemed like a ridiculous request for the brilliant risk manager and self-proclaimed risk czar, it was also an easy way to dispel his fears that he had forgotten his Greek alphabet. He begins singing: “alpha, beta, epsilon, zeta, eta, iota, lambda, mu, nu, xi, omicron, pi, sigma, tau, upsilon, phi, chi, psi and omega.”
Nikki suddenly sat up, opened her eyes and screamed, “you forgot delta, gamma, theta, rho and kappa. I think you better call Wharton in the morning and give back your MBA. You are familiar with the letters “M”, “B” and “A”, right?”
“What’s so funny?”
It was at that moment that Spiro realized what caused this nightmare. He explained to Nikki that in his profession, delta, gamma, theta, rho and kappa are known as the Greeks. They are a set of factor sensitivities used by traders (and risk czars) to quantify the exposures of option portfolios. Each one measures how the portfolio’s market value responds to changes in an underlying variable. Obviously, the pressures at work were getting to Spiro.
Delta measures the sensitivity to changes in the price of the underlying
Gamma measures the sensitivity to changes in the delta
Kappa (or vega) measures the sensitivity to changes in the implied volatility
Theta measures the sensitivity to time
Rho measures the sensitivity to a change in interest rates.
But by now Nikki was fast asleep.