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N(-d1)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › N(-d1)

  • This topic has 1 reply, 2 voices, and was last updated 6 years ago by John Moffat.
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  • June 3, 2019 at 8:52 pm #518650
    ayeshatabani
    Member
    • Topics: 98
    • Replies: 95
    • ☆☆

    In delta hedging we take n(d1). However if we are doing a delta hedge for put option will the delta be n(-d1)?

    Also say if n(d1) was 0.4554, then will
    N(-d1) will be 1-0.4554 ?
    Thanks

    June 4, 2019 at 7:11 am #518728
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54701
    • ☆☆☆☆☆

    It will be N(-d1) for a put option, but whenever this has been relevant in the exam then the question has specifically told you this.

    N(-d1) does not equal 1 – 0.4554

    You always look up for d1 in the tables (ignoring the sign) and then either add 0.5 if d1 is positive, or subtract from 0.5 if d1 is negative.

    I explain this in the lectures, and it is also written at the bottom of the normal distribution tables.

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