CFA Level I · CFA Level I Exam · Pricing and Valuation of Options
In the BSM model for a non-dividend-paying stock, a European call has a delta of 0.60. A European put on the same stock with the same exercise price and expiration most likely has a delta of:
The put delta is about -0.40. With no dividends, put delta equals call delta minus one, so 0.60 − 1 = −0.40. It is negative because the put loses value as the stock price rises.
- A-0.60
- B-0.40Correct
- C0.40
Explanation
Call delta equals N(d1) = 0.60 and put delta equals N(d1) − 1 = −0.40. A put's delta is negative because its value falls when the underlying rises, and −0.60 would ignore the put-call parity relationship.
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