Reading 15 - Exhibit 8

I’m looking over exhibit 8 on page 237. I understand that gamma is largest ATM. Exhibit 8 (book 3), the largest gamma value is at share price 15 which is not ATM. ATM is 16. Is this a mistake?

Thanks anybody in advance.

It looks like a mistake to me.

Is it listed in the errata?

If not, e-mail CFA Institute ( and mention it to them.

Thanks S2000.

Can you give us a snippet of the actual exhibit and or problem? There could be a lot of missing context here.

Gamma is always highest at St=X. Period. But obvious at St=15, it will still have very high gamma but not the peak one. No need for further explanation

Interestingly, I was just creating a graph of gamma from the BSM model and it appears that this isn’t true, period or not.

I have a call option with a strike price of USD 25 and one year to expiry; gamma is highest at USD 21.40, not USD 25.

Note that this is consistent with the graph in the exhibit: the maximum gamma occurs when the option is somewhat out of the money.

I’m e-mailing CFA Institute about this.

So the graph is correct but the written logic in the text is incorrect?

According to what I worked out in Excel, it appears so.

We’ll see what the authors of that reading have to say.