2
votes
3answers
164 views

Is it wrong to use 'real world' probabilities for option valuation?

Is it wrong to use 'real world' probabilities for option valuation, even when the market is not liquid enough to delta hedge the option? My instinct is that it is wrong, because the time value of ...
5
votes
2answers
2k views

How to numerically obtain delta?

The delta in option pricing, also called the hedge ratio, is expressed as the sensitivity of the option price to the underlying price change. The analytical solution for the most common option ...