The delta of an option is the ratio of the change in the price of the option to

ID: 2822277 • Letter: T

Question

The delta of an option is the ratio of the change in the price of the option to the chnage in the price of the underlying asset. Therefore delta is

A. the quantity of underlying stock units necessary to create a riskless portfolio

B. a known quantity that is uniformative with regard to the riskiness of the option

C. the number of derivatives necessary to create a riskless portfolio

D. a quantity that must remain constant in theh case of a multi-step tree in order to be able to compute the price of the option

Answer to the question is A

the quantity of underlying stock units necessary to create a riskless portfolio is called delta. it is used for hedging in price risk management.

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