13.6 D elta Ledgin g This involves maintaining a delta neutral portfolio The delta of a European call on a stock paying dividends at a rate g is N(d,)e q The delta of a European put is [N(d,)-1]e 9 The hedge position must be frequently rebalanced Delta hedging a written option involves a BUYhigh, SELL low?' trading rule Options, Futures, and Other Derivatives, 4th edition@ 2000 by John C. Hull Tang Yincai, C 2003, Shanghai Normal UniversityOptions, Futures, and Other Derivatives, 4th edition © 2000 by John C. Hull Tang Yincai, © 2003, Shanghai Normal University 13.6 Delta Hedging • This involves maintaining a delta neutral portfolio • The delta of a European call on a stock paying dividends at a rate q is • The delta of a European put is • The hedge position must be frequently rebalanced • Delta hedging a written option involves a “BUY high, SELL low” trading rule qT N d − ( ) e 1 qT N d − [ ( ) −1]e 1 •