Questions tagged [delta]
The delta tag has no usage guidance.
193
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Vega for ITM and OTM options against the ATM one
In Dynamic Hedging by Taleb, at pag. 182, is presented the concept of "Vega ratio". If I understand correctly, the author in Table 10.3 confronts the Vega of an OTM option with the one of an ...
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Is price really the cost of hedging?
Assume a vanilla option with 1y expiry. The total vol in 1yr is 20 bps, the vol in first 6 months is 5 bps. The price is created by BS(20 bps).
But is this price the correct cost of hedging? Will I ...
- 2,461
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Proof of the value of an option using hedging and no-arbitrage [ Paul Wilmott Chapter 3.12.2]
I encounter a difficulty in understanding the proof of finding the value of an option. Before going into the proof, let's talk above the assumptions and parameters of the model. Assume that we know ...
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Callable Bond Delta Profile
I am analyzing a callable bond with 10 Years of maturity coupon paid monthly at market rate plus the spread of 25 bps. The bond has an American Call option embedded. The strike price of a bond option ...
- 1,397
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Interpolation of IV based on delta
I have a dataset with options, all the same date and time to maturity but different IV and delta. Now, I want to find the IV for certain delta values (e.g 0.5) through interpolation. Do you think that ...
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What to predict in delta-gamma hedging?
I am working in delta-gamma hedging with machine learning. I guess I have to predict gamma (since predicting gamma tells you how delta will behave) but I don't know why is it needed. I think that a ...
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How to estimate Dealers’ Gamma Positioning
I am new here so please forgive my basic question.
There are many websites and experts out there that estimate dealer gamma positions, but I don't know what they are doing.
I think I understand the ...
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About delta basics [closed]
I am new to hedging and would like to work on delta-gamma hedging. However, I still have a lot of basic questions that are unclear to me.
Suppose we hold a long call option with strike $K$, with ...
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Precisely how do you delta-hedge a spot-1Y SOFR IRS with SOFR futures?
I'm struggling to construct hedge ratios that delta-hedge a spot-1Y IRS.
Say I'm roughly in the middle of an IMM period, date = Oct 30th 2023 and I trade a 1k dv01 spot-1Y SOFR swap. I'll need some ...
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Plotting net delta of calls and puts
I'm plotting the Net Delta of calls and puts for a given ticker symbol and a user specified range of expiration dates. Net Delta is calculated for each option contract using the following formula:
<...
- 131
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384
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Delta on x-axis in Volatility smile
I want to ask a perhaps simple question: Why do we use delta on the x-axis instead of the strike price when discussing volatility smile or volatility surface? In the book I'm currently reading, it is ...
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472
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Calculting Strike from Delta on an FX Risk Reversal Component
As part of a trade confirmation I have the following information:
...
- 11k
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288
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Moneyness, implied volatility and option greeks
I know that the more an option is ITM, the more is the implied volatility. I would like to deep dive into the concept, what is the logic that drives this statement? Also comparing an option with a ...
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0DTE volatility and greeks
When european stock options have very little time until expiration (less than 2-3 hours), they can exhibit extreme sensitivity to changes in the underlying asset's price. This behavior leads to ...
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Delta of Black formula vs numerical
I coded the Black formula (1976) to price a call where the underlying is a forward. I tested it against other sources and it works fine.
I then calculated the delta which, from my derivation and what ...
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