Do you know about Delta?

Quantitative Finance Level 2

Which of the following statements is false ?

The delta of a put is lower as the strike increases. The delta of a put is negative. The delta of a call is lower as the strike increases. The delta of a call is positive. The sum of deltas of the call and the put on the same strike is 1.

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Calvin Lin by Calvin Lin

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1 solution

Calvin Lin Staff
Feb 10, 2015

The correct statement is that the delta of the call minus the delta of the put is equal to 1.

This can be derived by differentiating the Put Call Parity with respect to the stock.

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Why the fourth argument is correct?

Yurong Xia - 1 year, 8 months ago

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Why do you think it is incorrect?

Note: the delta of the put is negative. A lower delta means that is is more negative.

Note: Since Δ P = Δ C − 1 \Delta_P = \Delta_C - 1 , if we believe that Δ C \Delta_C is lower as the strike increases, then it follows that Δ P \Delta_P is lower as the strike increases.

Calvin Lin Staff - 1 year, 8 months ago

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