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A note on the derivation of Black-Scholes hedge ratios

✍ Scribed by Tie Su

Publisher: John Wiley and Sons
Year: 2003
Tongue: English
Weight: 59 KB
Volume: 23
Category: Article
ISSN: 0270-7314
DOI: 10.1002/fut.10103

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✦ Synopsis

Abstract

An option hedge ratio is the sensitivity of an option price with respect to price changes in the underlying stock. It measures the number of shares of
stocks to hedge an option position. This article presents a simple derivation of the hedge ratios under the Black‐Scholes option‐pricing
framework. The proof is succinct and easy to follow. © 2003 Wiley Periodicals, Inc. Jrl Fut Mark 23:1119–1122, 2003

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