How Traders Manage Their How Traders Manage Their ExposuresExposuresChapter VI

Delta

Delta

Delta: Example

• Example: The value of your portfolio is $117,000.

One way of investigating risks you face is to

revalue the portfolio on the assumption that there

is a small increase in the price of gold from $800

per ounce to $800.10 per ounce. Suppose that the

new portfolio value is $116,900. A $0.1 increase in

the gold price decreases your portfolio value by

$100.

Delta:Example

Delta: Linear Products

•A linear product is one whose value at any

given time is linearly dependent on the

value of the underlying market variable.

•Forward, futures, and swaps are linear

products.