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How Traders Manage Their Exposures Chapter VI. Delta.

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Presentation on theme: "How Traders Manage Their Exposures Chapter VI. Delta."— Presentation transcript:

1 How Traders Manage Their Exposures Chapter VI

2 Delta

3 Delta

4 Delta: Example Example: The value of your portfolio is $117,000. One way of investigating risks you face is to revalue the portfolio on the assumption that there is a small increase in the price of gold from $800 per ounce to $ per ounce. Suppose that the new portfolio value is $116,900. A $0.1 increase in the gold price decreases your portfolio value by $100.

5 Delta:Example

6 Delta: Linear Products A linear product is one whose value at any given time is linearly dependent on the value of the underlying market variable. Forward, futures, and swaps are linear products.


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