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Questions tagged [delta]

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0answers
34 views

Understanding delta based strike selection in an Iron Condor

I am reading a small book on the proper use of Iron Condors (link). I do not use these strategies as I have had a very hard time being profitable on them. This book mentions some strategies to ...
3
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1answer
163 views

Delta Hedging/ Exchange for Currency Options

I'm looking at 2 cases of hedging EURUSD, using call spread or range forward. Lets say spot is 1.1300 and my buy call is at 1.1300 and sell call is at 1.1500. Hypothetically I'm assuming that this is ...
1
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1answer
76 views

Concentration risk in Rates

What are some good ways to assess the concentration risk for a rates curve or by currency when volumes traded by instrument are not easily available? For ex, if for some currencies, the PV01 at ...
2
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0answers
90 views

Portfolio Delta - long call, long put and short call

First and foremost, I'm trying to understand why you would construct a portfolio made up of long calls, long puts and short calls. I find this really abstract and confusing. I've tried drawing the pay-...
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1answer
44 views

Port a model dependent swaption sensitivity to a new model

I have a short rate model in which I have (among others) the following metric (for leverages) for a swaption : $$L = \frac{\frac{\partial}{\partial r}V_0^{\textrm{Swaption}}}{\frac{\partial}{\partial ...
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1answer
2k views

What is the formula for beta weighted delta and gamma?

I am trying to calculate the beta weighted delta and gamma for a portfolio of options of different underlying stocks, but I can't seem to find the correct formula. Can someone point me to it or a ...
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0answers
57 views

Greeks Intraday Characteristics and PnL of options

I am modeling intraday and short term options on Futures.Think Monday, wednesday, friday contracts on these tickers: ES, NQ, CL, ZN, ZF, NG. I am wondering about documentation for Intraday greek ...
2
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1answer
90 views

How to derive and interpret the duration of a call option?

I read here that CFA students are taught that $$ D_{C} = \frac{\Delta_{C} D_{B} B}{C} $$ Where $D$ is the duration, $\Delta_{C}$ is the first derivative of the options price with regards to the ...
3
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2answers
121 views

Conceptual explanation of the relationship between gamma and vega plotted against delta for a European call option

I recently plotted Gamma and Vega against Delta for a European call option and found that the graphs look very similar. This makes sense to me mathematically since the two formulas are pretty much the ...
1
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1answer
115 views

Getting option volatility off vol surface

I am currently looking into FX options. I am given a delta-tenor vol surface and I want to get the volatility of an option given its strike and time to expiry. I am reading about the method used and ...
1
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1answer
65 views

Value-at-risk and Equity delta

How to validate value-at-risk calculation on an equity portfolio using equity sensitivities? I don't have trouble doing that for rates instruments or options but I don't know which underlying risk ...
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4answers
665 views

European Call Option Delta Upper Bound

For a pure equity process (with interest rate, dividend, etc., being zero) not necessarily the geometric Brownian motion, is the delta of a European call option always no higher than $1$? I am NOT ...
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2answers
543 views

Interest Rate Risk - The Greeks

IR Delta and Gamma. Can someone please explain if my understanding is accurate as relates to a 2yr interest rate swap? You are considered to be long Delta in an interest rate swap if you are ...
0
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1answer
183 views

Delta-Gamma VaR question on inputs (do I need only one delta or the delta for the past 500 days?)

When calculating a VaR using the Delta-Gamma approach, I am supposed to use this formula: ∆(V) = Delta * ∆(X) + 0.5 * Gamma * ∆(X)² where: ∆(V) = change in value of the asset in portfolio ∆(X) = ...
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2answers
116 views

Delta neutral strategy using a combination of put and call options

I am learning about quantitative finance and currently learning about delta neutral strategies. The examples given are most of the times of the form: if you buy call options, you can hedge your ...
0
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1answer
102 views

ATMF FX straddle delta

I am trying to price an ATMF FX (say Usdidr) straddle - the fxdelta for call and put leg are quite different with put fxdelta being higher than call delta. (Absolute values) Why would this be the case?...
7
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1answer
382 views

Different versions of sticky strike, moneyness and delta

I head a lot of versions of those three concepts: sticky strike, sticky moneyness and ...
2
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1answer
239 views

Black-Scholes: Delta/probability of exercise increases with volatility

The delta for an ITM call option with increasing volatility initially decreases, reaches a global minimum, and then increases. If we consider delta as a representation of risk-neutral probability of ...
2
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1answer
189 views

Kirk Approximation and Exercise Probability

I have a question about spread options. I'm pricing a put option on two assets, with a strike value of 0: $max(K-(F_1-F_2);0)=max(0-(F_1-F_2);0)=max(F_2-F_1;0)$ I know this kind of options could be ...
3
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1answer
224 views

Mathematical equation relating $\frac{dV}{dS}$ to $\frac{dV}{dK}$

Please help me figure out what is the mathematical relationship between $\frac{dV}{dS}$ (Delta) and $\frac{dV}{dK}$ ($K$=strike), taking into account vol skew. I ask this because I want to figure out ...
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0answers
45 views

Going from Stochastic Discount Factor / Risk Neutral Density -> Hedge Ratio

Assuming a probability distribution function is known in its entirety, what methods are available to construct a hedge ratio? For guidance, I went to the canonical Empirical Pricing Kernels and found ...
0
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1answer
75 views

What vol to use when implying strike from delta?

I have a set of implied vols in delta space and want to derive for each delta the corresponding strike. I understand the procedure, but I am not sure what implied vol I should use, whether this has to ...
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1answer
80 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?
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1answer
2k views

Use of cash delta vs forward delta and the mirror image rule

There has been no mention in this text of why this formula uses forward delta not cash delta. Why should have this been obvious to the reader? How can a put be delta neutral at 30%, what does this ...
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0answers
128 views

QuantLib in Python, are there any existing methods to handle the options delta on expiration day?

Tried [ql.Settings.instance().includeReferenceDateEvents = True] and it works for the calculation of NPV using intrinsic value of the option. But Delta is nan for an in-the-money option. I understand ...
1
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1answer
228 views

On a FX volatility smile, Is a-delta put volatility equal to (1-a)-delta call volatility?

On a FX volatility smile in terms of delta, If I want 95-delta put vol, Is this volatility equal to a 5-delta call vol, and viceversa? Thanks.
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1answer
175 views

Can we 'predict' the delta of a stock? The delta of a stock is $\pm 1$ right? [closed]

“A stock is like a living organism. A sparrow, say. And we are able to create an emergent-based abstraction of that sparrow, which closely approximates the sparrow itself, accounting for migration ...
2
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2answers
92 views

Why do we only need to buy or sell stock to hedge when the underlying is close to the strike?

Delta mesure the slope of the digital option.It also provides hedging information. Why do we only need to buy or sell stock to hedge when the underlying is close to the strike?
1
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1answer
249 views

Call option Delta

I have an exercise where I need to show that the prices of call options $ C(t,K)=E((S_t-K)^+),t \in [0,T]$ with Strike $K$ for fixed $t$: $$\frac{\partial ^+C(t,K)}{\partial K}=-P(S_t>K).$$ We ...
1
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2answers
279 views

What is the delta of a portfolio invested in different stocks?

I understand that if I have a portfolio invested in stock A and options on stock A, the delta of my portfolio is going to be the weighted sum of the delta of the stock (=1) and of the option. Now if ...
2
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2answers
343 views

Deduce expected exposure profile from option/structure delta?

I am thinking about whether there exists a relationship between the delta of an option (or any structured derivative) and it's expected positive/negative exposure? An intuitive question would be the ...
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0answers
87 views

Should I interpolate before or after to find option price using Vanna-Volga method?

I am trying to calculate the implied option premium $C(K)$ and $\Delta$ using the procedure outlined by Castagna and Mercurio in this paper - http://www.fabiomercurio.it/consistentfxsmile.pdf My ...
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0answers
118 views

Option delta under Black mode vs SABR

Under what scenarios would the Deltas for Options on Bond Futures differ the most between Black vs SABR models ?
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0answers
204 views

Does delta adjusted exposure make sense for an equity variance swap?

The software vendor that I am using for the calculation of the market risk exposure claim that they cannot compute the delta adjusted of the equity variance swap positions since there is no specific ...
-1
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1answer
807 views

What is the delta of a zero coupon bond? [closed]

I understand that zero coupon bond changes as interest rates change. But I am unsure of how to get the delta. Say I buy a 5Y zero coupon bond with notional amount 5M USD. How do I calculate the delta? ...
3
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2answers
815 views

Delta hedging frequency, Gamma PnL

I want to know the expectation and the variance of the Gamma PnL for different hedging frequencies. Let's say the return of the underlying follow a normal process: $dr= \sigma*dW$, the market trades ...
2
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0answers
67 views

'Market price' based Delta vs 'Model Price' based Delta for Bond Future Options?

My understanding of Delta is the change in the Option's price relative to the change in the underlying asset's price. In the case of Treasury Future Options (ie those on CME), one intuitive way to ...
3
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0answers
44 views

Calculate latest underlying price (or option), given new option (or underlying) market price?

Given a reference underlying price, reference option price, delta and gamma, if I receive a new underlying/option price what equation should I use to calculate the respective option/underlying price (...
1
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1answer
92 views

Estimate American-style option delta from similar options

I have a data set which looks something like this, referring to American-style put and call options: ...
2
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2answers
413 views

Is commodity futures's delta equal to 1?

According to John Hull's book, equity futures delta does not equal to one. For commodities futures, since there is no centralized exchange for physical commodities, do commodities futures' delta equal ...
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2answers
4k views

Strike / delta relationship for FX options

I am tryinto find out how to go from delta to strike. If wee look at the bloomberg I am looking at 1M ATM volatility. I have included the Bloomberg data as a picture where we have following ...
1
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1answer
263 views

Delta FX of a quanto put

I've heard that quanto options are not sensitive to the FX...but when i draw the graph of the FX delta of the put i find a positive value for all K. For very deep ITM quanto put the FX delta is ...
11
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1answer
1k views

How do different models impact option Greeks?

If I trade an option using delta, vega, Prob OTM, etc. these are derived from a model. How do leading models impact valuations in terms of the Greeks? I suppose to form a baseline it would have to be ...
2
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2answers
4k views

Calculate strike from Black Scholes delta

I have a list of deltas and their corresponding volatilities in an FX market but I want to go from delta to strike price. In this Question similar problem is being discussed How can I calculate the ...
4
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1answer
425 views

European call delta derivation

Let's write $S(T) = S_T$ and $S(0) = S_0$. We want to compute $\frac{d}{dS_0}\mathbb{E}[f(S_T)]$. From a previous discussion this is equal to $$\mathbb{E}_{S_0}\left[f(S_T)\frac{g'_{S_0}(S_T)}{g_{S_0}(...
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1answer
302 views

Option delta difference between OTM call and OTM put

Looking e.g. at Natural gas futures options, I see for June contracts (expiration 25th May) the follwing data: Call 4.3 (26.8% difference to Underlying) 36.2% IV and a delta of 0.04 Put 2.5 (26.3% ...
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0answers
344 views

How to calculate Delta of an option in the Local Volatility model?

Let $dS/S = \sigma(S,t) dW$. Let the local volatility be known, i.e, we know the formula $\sigma(S,t)$. How do I derive $\Delta$ of a regular call in this model? Let BS be the Black Scholes price, ...
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0answers
866 views

how to calculate forward delta (not spot delta) of a swap?

how could I calculate the forward delta of of a cross currency swap? Suppose I have a swap contract to exchange 1 mio USD with 66.15 mio INR, 3 months later, current Spot is 65.04, how can i ...
2
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0answers
75 views

Delta of a Single Future Commodities ETC

I have seen marketing materials advertising ETCs on single commodities futures to track the commodities performance (or better the corresponding front month future contract) as Delta 1 products. ...
4
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2answers
9k views

How can I calculate the strike price or implied volatility from a given delta?

I have calculated the implied volatility for all strikes of a certain product (options on futures) and approximated the ATM volatility. My question is how can I figure out the implied volatility for a ...