Asked by Elijah Price on May 10, 2024
Verified
The hedge ratio of an option is also called the option's
A) alpha.
B) beta.
C) sigma.
D) delta.
E) rho.
Hedge Ratio
A ratio used to measure the amount of exposure reduced by hedging, indicating the proportion of risk protected against price movements.
Delta
In the context of options and finance, delta measures the sensitivity of an option's price to changes in the price of the underlying asset.
Option's
Financial derivatives that grant the buyer the right, but not the obligation, to buy or sell an asset at a specified price before a certain date.
- Elucidate the notion of the hedge ratio and the process for calculating it across various options.
Verified Answer
JB
Jessica BroyhillMay 17, 2024
Final Answer :
D
Explanation :
The hedge ratio of an option is referred to as the option's delta. Delta measures the sensitivity of an option's price to a change in the price of the underlying asset.
Learning Objectives
- Elucidate the notion of the hedge ratio and the process for calculating it across various options.