Sir, in BPP kit question 18 Marengo, qn (a), the following has been done in the answer,
d1= -0.06
-d1= 0.06
N(-d1)= 0.5+0.0239=0.5239
I don't understand how and why did they reverse the value of d1 and made it a positive value and added 0.5 with the cumulative value.
According to me, it should have been like this
d1= -0.06
N(d1)= 0.5-0.0239=0.4761.
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Delta Hedge
6y ago#1Had you been required to use call options then you would have been correct.
However the question specifically says to use put options and says that the delta of a put option is equivalent to N(-d1). (Exam questions will always say this if you are required to use put options).
Given that d1 = - 0.06, then -d1 = + 0.06 and so the printed answer is correct.
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