Exploring the Role of Greek Letters in Financial Engineering: Implications for the Kenyan Market

Description

Page: 591-599

Jackson Barngetuny (School of Business, University of Eastern Africa, Baraton, Kenya)

This study examines the role and applications of the Greek letters Delta, Rho, and Vega in financial engineering, particularly within Kenya’s emerging financial markets. Through a comprehensive review of academic articles, industry reports, and case studies, the research explores how these tools are used in financial derivatives and risk management. Delta is analyzed about currency risk hedging, Rho in managing interest rate exposure, and Vega in volatility arbitrage. Although these strategies are widely effective globally, challenges such as low market liquidity, limited data access, and market volatility hinder their practical application in Kenya. Despite these obstacles, the study highlights the potential for these tools to improve risk management and market stability in Kenya. The research further identifies the need for advancements in financial infrastructure, regulatory frameworks, and financial literacy to leverage these tools fully. Recommendations include enhancing market liquidity, improving real-time data access, and fostering financial education. Additionally, the study advocates for incorporating behavioral finance insights into policymaking to mitigate biases affecting financial decisions. In conclusion, the study underscores the significant potential of Greek-letter-based tools to strengthen Kenya’s financial markets with proper infrastructure, regulation, and expertise improvements.