Mathematical finance

Delta neutral

In finance, delta neutral describes a portfolio of related financial securities, in which the portfolio value remains unchanged when small changes occur in the value of the underlying security. Such a portfolio typically contains options and their corresponding underlying securities such that positive and negative delta components offset, resulting in the portfolio's value being relatively insensitive to changes in the value of the underlying security. A related term, delta hedging is the process of setting or keeping the delta of a portfolio as close to zero as possible. In practice, maintaining a zero delta is very complex because there are risks associated with re-hedging on large movements in the underlying stock's price, and research indicates portfolios tend to have lower cash flows if re-hedged too frequently. (Wikipedia).

Video thumbnail

Simplifying a rational expression by factoring

Learn how to simplify rational expressions. A rational expression is an expression in the form of a fraction where the numerator and/or the denominator are/is an algebraic expression. To simplify a rational expression, we factor completely the numerator and the denominator of the rational

From playlist Simplify Rational Expressions

Video thumbnail

Simplify a rational expression

Learn how to simplify rational expressions. A rational expression is an expression in the form of a fraction where the numerator and/or the denominator are/is an algebraic expression. To simplify a rational expression, we factor completely the numerator and the denominator of the rational

From playlist Simplify Rational Expressions

Video thumbnail

Simplify a rational expression by factoring

Learn how to simplify rational expressions. A rational expression is an expression in the form of a fraction where the numerator and/or the denominator are/is an algebraic expression. To simplify a rational expression, we factor completely the numerator and the denominator of the rational

From playlist Simplify Rational Expressions

Video thumbnail

Simplify a rational expression

Learn how to simplify rational expressions. A rational expression is an expression in the form of a fraction where the numerator and/or the denominator are/is an algebraic expression. To simplify a rational expression, we factor completely the numerator and the denominator of the rational

From playlist Simplify Rational Expressions

Video thumbnail

Simplifying a rational expression with a trinomial

Learn how to simplify rational expressions. A rational expression is an expression in the form of a fraction where the numerator and/or the denominator are/is an algebraic expression. To simplify a rational expression, we factor completely the numerator and the denominator of the rational

From playlist Simplify Rational Expressions

Video thumbnail

Simplify a rational expression

Learn how to simplify rational expressions. A rational expression is an expression in the form of a fraction where the numerator and/or the denominator are/is an algebraic expression. To simplify a rational expression, we factor completely the numerator and the denominator of the rational

From playlist Simplify Rational Expressions

Video thumbnail

How to use the LCD to help us solve a rational equation

👉 Learn how to solve proportions. Two ratios are said to be proportional when the two ratios are equal. Thus, proportion problems are problems involving the equality of two ratios. When given a proportion problem with an unknown, we usually cross-multiply the two ratios and then solve for

From playlist How to Solve Rational Equations

Video thumbnail

Simplifying rational expression

Learn how to simplify rational expressions. A rational expression is an expression in the form of a fraction where the numerator and/or the denominator are/is an algebraic expression. To simplify a rational expression, we factor completely the numerator and the denominator of the rational

From playlist Simplify Rational Expressions (Binomials) #Rational

Video thumbnail

Delta Neutral Portfolios - The Options Greeks - Options Trading Tutorial

These classes are all based on the book Trading and Pricing Financial Derivatives, available on Amazon at this link. https://amzn.to/2WIoAL0 Check out our website http://www.onfinance.org/ Follow Patrick on twitter here: https://twitter.com/PatrickEBoyle What is a Delta Neutral Portfol

From playlist Class 4 The Greeks & Dynamic Hedging

Video thumbnail

Risk Management Lesson 2B: the Greeks (second part)

Second part of the second lesson. Topics: - The Greeks (second part) Link to extra materials: https://www.dropbox.com/s/8cpekvo7w8msdtk/exercises_lesson2.pdf

From playlist Risk Management

Video thumbnail

Simplify a rational expression with two trinomials

Learn how to simplify rational expressions. A rational expression is an expression in the form of a fraction where the numerator and/or the denominator are/is an algebraic expression. To simplify a rational expression, we factor completely the numerator and the denominator of the rational

From playlist Simplify Rational Expressions

Video thumbnail

Hedging (aka, neutralizing) option delta and gamma (FRM T4-19)

[my xls is here https://trtl.bz/2HjdxQq] To hedge options Greeks, we want to rely on the formula: +/- Quantity * %Greek = Position Greek, where a short position is represented by negative quantity. In this example, the market maker writes 10,000 ATM call options, each with percentage (per

From playlist Valuation and RIsk Models (FRM Topic 4)

Video thumbnail

QRM 10-1: The Greeks for Market Risk

Lesson 10 is devoted to the model building approach to market risk. To use such an approach, we need some basic tools from financial mathematics and basic risk management, an example being the Greeks and duration (which nevertheless is linked to the Greeks). For those of you who are not fa

From playlist Quantitative Risk Management

Video thumbnail

The Option Greeks and Hedging - Revision Lecture

These classes are all based on the book Trading and Pricing Financial Derivatives, available on Amazon at this link. https://amzn.to/2WIoAL0 Check out our website http://www.onfinance.org/ Follow Patrick on twitter here: https://twitter.com/PatrickEBoyle

From playlist Revision Lectures

Video thumbnail

Creating Neutral Portfolios - The Option Greeks

These classes are all based on the book Trading and Pricing Financial Derivatives, available on Amazon at this link. https://amzn.to/2WIoAL0 Check out our website http://www.onfinance.org/ Follow Patrick on twitter here: https://twitter.com/PatrickEBoyle The option sensitivity measures

From playlist Class 4 The Greeks & Dynamic Hedging

Video thumbnail

FRM: Why delta-neutral hedge is insufficient

Delta is not constant. Gamma gives the rate of change of delta (i.e., delta is first derivatives, and Gamma is second derivative). A delta-neutral portfolio is only temporarily (instantaneously) hedged. For more financial risk videos, visit our website! http://www.bionicturtle.com

From playlist Derivatives: Option Pricing

Video thumbnail

Volatility Trading - Call and Put Options - Trading Tutorial

These classes are all based on the book Derivatives For The Trading Floor, available on Amazon at this link. https://amzn.to/3GdLi2s Check out our website http://www.onfinance.org/ Follow Patrick on twitter here: https://twitter.com/PatrickEBoyle What is volatility trading? Volatility

From playlist Class 4 The Greeks & Dynamic Hedging

Video thumbnail

Volatility Arbitrage - How does it work? - Options Trading Lessons

What is Volatility Arbitrage? Volatility arbitrage is a trading strategy that attempts to profit from the difference between the forecasted price-volatility of an asset, like a stock, and the implied volatility of options on that asset. These classes are all based on the book Trading and

From playlist Class 4 The Greeks & Dynamic Hedging

Video thumbnail

Market maker's delta-hedge illustrated (FRM T4-20)

[my xls is here https://trtl.bz/2O1OwKT] This market maker writes one call option (to the client) and hedges delta by purchasing Δ shares of the stock; this neutralizes delta but leave the market maker with a negative position gamma due to the short option position. The net profit, which i

From playlist Valuation and RIsk Models (FRM Topic 4)

Video thumbnail

Dividing rational expressions

Learn how to divide rational expressions. A rational expression is an expression in the form of a fraction, usually having variable(s) in the denominator. Recall that to divide by a fraction, we multiply by the reciprocal of the fraction. The same rule applies when we want to divide by a r

From playlist How to Divide Rational Expressions #Rational

Related pages

Greeks (finance) | Infinitesimal | Black–Scholes model | Partial derivative | Convexity (finance) | Rational pricing