Gen Combo Looseleaf Principles Of Corporate Finance With Connect Access Card
Gen Combo Looseleaf Principles Of Corporate Finance With Connect Access Card
13th Edition
ISBN: 9781260695991
Author: Richard A Brealey
Publisher: McGraw-Hill Education
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Chapter 21, Problem 10PS

Option delta Suppose you construct an option hedge by buying a levered position in delta shares of stock and selling one call option. As the share price changes, the option delta changes, and you will need to adjust your hedge. You can minimize the cost of adjustments if changes in the stock price have only a small effect on the option delta. Construct an example to show whether the option delta is likely to vary more if you hedge with an in-the-money option, an at-the-money option, or an out-of-the-money option.

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