New answers tagged delta
3
Look here for a detailed derivation of the formula for $\Delta$ (be aware that this particular website uses $r_d$ to denote the risk-free rate and $r_f$ to denote the dividend yield). You can always ask for more specific help regarding a particular step in the derivation.
It is easy to see that $\mathbb{Q}[\{S_T\geq K\}]= \Phi(d_2)$. Just replace $S_T=S_0\...
1
All the maths and logic above look correct to me. The moral of the story here, and the point of structuring the exercise thus, is a reminder that an option is no more or less than a bet that can be hedged with an equivalent position in the underlying. There doesn’t have to be some devilishly clever cunning plan. The positions above might eg the risk of a ...
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