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Postby ameyakukde » Sun Apr 07, 2013 12:37 am

Suppose current price of the stock is $20. What is the delta of the call option on the stock with strike price $20 if the price of the stock moves up to $22 with probability 60% and moves down to $18 with probability 40%?

How to solve this using "delta= (V(+) - V(-))/ (u-v)*S" formula given in handbook?

I am getting a wrong answer by solving via this method. Kindly solve the same using this formula mentioned in the handbook.

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Postby vnraghuveer » Mon Apr 08, 2013 5:50 pm

Here current price = strike price i.e. at the money which means delta=0.5

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