Interview Question: One Greek

Sample Question #132 (finance – options)

What’s the delta of an option, and how do you calculate it?

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One Response to Interview Question: One Greek

  1. Brett says:

    ANSWER
     
    An option’s delta is the ratio of price change of the option to the price change of the underlying asset. (In fact, the concept of delta applies to other derivatives as well as to portfolios as well.) Only European options have closed-form solutions to finding their delta values. To calculate the delta of any other option, a numerical approximation method, such as Monte Carlo simulation or numerical differential equation, must be used.
     

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