# Questions tagged [delta-hedging]

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### Delta Hedging Example

I was reading Dynamic Hedging by N. Taleb and in the chapter dedicated to the delta, there is this example of a trader position in options (one-month European call, flat yield curve, forward is ...
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Are all FX trades ( RR, BF, ATM)quoted in implied vol term delta neutral trades? If trades are not delta neutral at the initiation does that mean it is speculative trading? Why/ why not?
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### How can i make the table format and i want to fix the Error [closed]

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Are all trades quoted in implied vol terms delta neutral trades? If trades are not delta neutral at the initiation does that mean it is speculative trading? Why/ why not?
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### European Call option replication

An asset $S_t$ is evolving according to the Black-Scholes model. We want to replicate a call option on this asset by holding Delta units of the asset at every time. I use a Monte Carlo algorithm to ...
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### Delta hedging: theoretical value vs actual price

One way to derive the Black-Scholes PDE is via the Delta-hedging argument: Suppose that $V_t = V(t, S_t)$, for some function $V: [0,T] \times \mathbb{R} \to \mathbb{R}$. We construct a portfolio by ...
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### Simple 3 way delta hedge

Consider 3 futures contracts: A BTC/ETH, settled in BTC B USD/ETH, settled in ETH C USD/BTC, settled in BTC As the markets aren't efficient, sometimes these ...
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### Optimal Hedging of Options - asymmetry between long and short vol positions

Going over Zakamouline's Approximation method for optimal delta hedging of options, it is claimed that the result remains valid for both buying options (long vol positions) or selling options (short ...
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### Effect of mean reverting Volatality in Black and Scholes? [closed]

Can someone please elaborate what would be the effect of a mean reverting volatility (instead of a constant volatility) in pricing options using BS ? Also how would the greeks vary?
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### How is the performance measure computed here?

The image is from John C Hull Textbook titled Options, Futures and Other Derivatives ( page 407 - Ninth Edition). The table above was obtained after computing the delta of stock price, shares ...
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### Hedging with machine learning

I’ve been thinking about an interesting problem lately: Suppose I have a position in an exotic derivative. How can I automate the hedging process? Traditionally, one build a pricing model and ...
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### How is FX cross rates options are priced?

Say I have market for EUR/USD and also USD/CAD, how would EUR/CAD would be priced and hedged in practice? What are good papers/book chapters to read on that? (Assuming basic knowledge already on ...
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### Expected value of delta-hedged portfolio

Consider portfolio in black-scholes world $\Pi = \Delta S - V$, where $S$ is the stock price and V is the price of the option. I have read that if we set $\Delta = \frac{\partial V}{\partial S}$ ...
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### Option order imbalance

Currently studying the paper: HU, Jianfeng. Does Option Trading Convey Stock Price Information?. (2014). Journal of Financial Economics. 111, (3), 625-645. Research Collection Lee Kong Chian School ...
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### Can prediction of realized volatility for next day improve delta hedging (gamma scalping)?

Im quite confused. As I understand from standard delta PNL of option + underlying position, pnl is equals to difference between realized and implied vol weighted by gamma. However, as I understood, ...
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I am working on an Index and I am trying to price Call options on it. I work with the 3 Months LIBOR as Cash. I use the following Black-Scholes formula $$C_{t} = S_{t}e^{-q_{t}(T-t)}\mbox{N}[d_{1}(t)]... 1answer 123 views ### Why are vanilla OTC options are quoted in delta and vol? Why do we quote options in delta bid-ask & volatility bid-ask & why not it is quoted in terms of option premium? 1answer 55 views ### duration hedging of illiquid bonds Let's say that I have a totally illiquid 30Y bond that I want to hedge with short-dated bonds and that the market is liquid up to 10Y bonds. After 20 years, my 30Y bond will become a 10Y bond so I'll ... 1answer 93 views ### Using BS Delta to hedge in a LV Model Why do some people use a Black Scholes Delta instead of the delta given by the Local Volatility model? 0answers 79 views ### Delta hedge a long option using a short option [closed] If I long a call option of 1 mio USD/SGD for example, I understand that at strike price (ATM), delta is approximately +0.5. To approximately hedge this delta, I also understand we can short 0.5 mio ... 2answers 589 views ### How does a Delta Hedged portfolio yield the Risk-free? Here I'm considering the simple case of a dealer writing call options on a stock and hedging the short position with a "textbook" Delta Hedge, i.e. goes long on N_c \times Delta stocks (where N_c ... 1answer 236 views ### Difference in exposure between delta hedged options, ATM straddles and delta hedged straddles What is the difference in exposures between delta hedged options, ATM straddles and delta hedged straddles. They all seem to provide the same thing, which is exposure to volatility. What are the ... 2answers 1k views ### Interpertation of delta hedge error in Black Scholes I have spent some time to prove the delta hedge error as described in this paper paper page 16-17 by Davis. The proof is discussed here Deriving Delta Hedge error in the B-S setup (part 2) (a post by ... 1answer 237 views ### Deriving Delta Hedge error in the B-S setup (part 2) In this paper paper page 16-19 by Davis and this discussion derivation of the hedging error in a black scholes setup, the derivation of the delta hedging error in the Black Scholes model is discussed. ... 1answer 66 views ### Change in call price Value as time goes by In various papers and discussions in here I have seen that in delta hedging setup people compute the Change in value/Price of Call option by:$$ dC_t = \Theta_t dt + \Delta_t dS + \frac{1}{2} \...
The price of a call with a stock with Bachellier process as its underlying and zero interest rate is giving by: C(t)=(S(t)-K)\Phi(\frac{S(t)-K}{\sigma \sqrt{T-t}})+\sigma \sqrt{T-t} \phi(\frac{S(t)-...