The hedge ratio is often called the option's ________.
A) delta
B) gamma
C) theta
D) beta

Question

Quizplus · Accepted Answer

The hedge ratio, also known as the delta of an option, is a measure of the sensitivity of an option's price to changes in the price of its underlying asset. It represents the ratio of the change in the option's price to the change in the price of the underlying asset. As such, it is a crucial variable in determining the optimal hedging strategy for an options portfolio. Gamma measures the rate of change of the option's delta, theta measures the rate of time decay, and beta measures the volatility of a stock relative to the market. While these are important options parameters, they are not directly related to the hedge ratio.

The Hedge Ratio Is Often Called the Option's ________