Delta-one: Difference between revisions
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Perfectly [[hedge]]d; a [[delta]] of one. Refers to a hedging strategy where a [[counterparty]] providing [[derivative]] exposure to an [[underlier]] by buying that underlier. You only need to delta-hedge your net exposure to the underlier - if, for example, you have written a long and a short TRS on the same underlier in the same size, you are delta-one hedged without buying anything - the two positions net each other off, and therefore hedge each other, exactly. | {{ap|eqderiv|{{image|Delta-hedge|jpeg|a “delta” hedge yesterday geddit??}} }}Perfectly [[hedge]]d; a [[delta]] of one. Refers to a hedging strategy where a [[counterparty]] providing [[derivative]] exposure to an [[underlier]] by buying that underlier. You only need to delta-hedge your net exposure to the underlier - if, for example, you have written a long and a short TRS on the same underlier in the same size, you are delta-one hedged without buying anything - the two positions net each other off, and therefore hedge each other, exactly. | ||
(But why on Earth would you go [[long]] and [[short]] the same [[underlier]] at the same time (unless, of course, you were providing [[synthetic prime brokerage]] to a range of [[hedge fund]] clients)? | |||
{{Seealso}} | {{Seealso}} | ||
* | *[[Greeks]] | ||
*[[Hedging]] | *[[Hedging]] | ||
*[[Delta]] | *[[Delta]] | ||
*[[Template:Calculation agent dispute|Calculation agent dispute]]. | *[[Template:Calculation agent dispute|Calculation agent dispute]]. | ||
Latest revision as of 13:30, 14 August 2024
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Equity Derivatives Anatomy™ A Jolly Contrarian owner’s manual™
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Perfectly hedged; a delta of one. Refers to a hedging strategy where a counterparty providing derivative exposure to an underlier by buying that underlier. You only need to delta-hedge your net exposure to the underlier - if, for example, you have written a long and a short TRS on the same underlier in the same size, you are delta-one hedged without buying anything - the two positions net each other off, and therefore hedge each other, exactly.
(But why on Earth would you go long and short the same underlier at the same time (unless, of course, you were providing synthetic prime brokerage to a range of hedge fund clients)?