Delta

The change in an option's value for a small change in the price of the underlying. A delta hedge holds the opposite amount of the underlying.

Where you will meet it

Delta comes up in 25 learning outcome notes across the FRM syllabus. A few of them:

• Fund Management
  FRM Part I · Financial markets and products

  “Convertible arbitrage buys convertible bonds and shorts delta times the conversion shares of the stock.”

• How Do Firms Manage Financial Risk?
  FRM Part I · Foundations of risk management

  “Derivatives change exposure by their delta or duration equivalents.”

• Calculating and Applying VaR
  FRM Part I · Valuation and risk models

  “Delta only describes the slope at today's price.”

• The Evolution of Stress Testing Counterparty Exposures
  FRM Part II · Credit risk measurement and management

  “Sensitivity-based estimates use CS01 and delta and gamma terms, including cross terms.”

See also

Delta hedging · Option

All terms beginning with D · FRM glossary

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