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Explain and compute option delta

BnpData Scientist · Technical Screen
EasyData ScientistTechnical ScreenSoftware Engineering Fundamentals

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Evaluates understanding of option delta, the differing intuitions/signs for calls versus puts, and the ability to compute deltas under the Black–Scholes model; commonly asked to assess quantitative reasoning about derivative sensitivities, model-based pricing, and hedging concepts.

In options trading, what is an option’s delta?

  1. Give the definition of delta and explain its intuition/sign for calls vs puts.
  2. Under the Black–Scholes model (European options), show how to compute delta for a call and a put.
  3. Briefly explain how delta is used for hedging.