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Hedge Ratio formula

September 24, 2016

For Calls:

h = C+ minus C- / S+ minus S-

For Puts:

h = P+ minus P- / S+ minus S-

  • h is always greater than or equal to zero.
  • The hedge ratio is always the difference between option prices over the difference in stock prices.
  • The up scenario value always has the down scenario value subtracted from it.
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From → Asset Valuation

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