Asked by João Victor on Jul 15, 2024
Verified
Delta is defined as
A) the change in the value of an option for a dollar change in the price of the underlying asset.
B) the change in the value of the underlying asset for a dollar change in the call price.
C) the percentage change in the value of an option for a 1% change in the value of the underlying asset.
D) the change in the volatility of the underlying stock price.
E) None of the options are correct.
Delta
The number of stocks required to hedge against the price risk of writing one option. Also called the hedge ratio.
Underlying Asset
An asset upon which a derivative's price is based, ranging from commodities and currencies to stocks and bonds.
Call Price
The price at which a callable bond can be redeemed by the issuer before its maturity date, typically higher than the face value.
- Comprehend the significance of delta as an indicator of sensitivity in the valuation of options.
Verified Answer
JH
Jaylen HeffnerJul 18, 2024
Final Answer :
A
Explanation :
Delta is a measure of the sensitivity of an option's price to a change in the price of the underlying asset. It represents the change in the option's price for a one-dollar change in the price of the underlying asset.
Learning Objectives
- Comprehend the significance of delta as an indicator of sensitivity in the valuation of options.