- CFA Exams
- CFA Level I Exam
- Study Session 14. Derivatives
- Reading 38. Valuation of Contingent Claims
- Subject 6. Option Greeks and Implied Volatility
CFA Practice Question
Consider a call option, with X = $40; r = 0.06; T = 90 days; σ = 0.1; and S0 = $70. The delta of this call option should be close to ______.
B. 1
C. This cannot be determined but it is very sensitive to a change in the underlying price.
A. -1
B. 1
C. This cannot be determined but it is very sensitive to a change in the underlying price.
Correct Answer: B
As the option is deep-in-the-money, its delta should be close to 1.
User Contributed Comments 3
| User | Comment |
|---|---|
| danlan2 | Deep in the money, its delta should be close to 1; deep out of money, its delta should be close to 0. |
| vi2009 | At the money & close to expiration, delta = 0.5 |
| tabulator | delta is positive for a call |