Hi all, in part v, the examiner's report states that Delta = -0.161 for the option so the investor would need to short 0.161 shares for every option held. Shouldn't delta hedging be the case where total delta =0? Then shouldn't we should buy 0.161 shares for every option held? Thanks in advance for your help!
You’re absolutely right; a long position in the underlying share is required to get that total delta equal to zero. Unfortunately the Examiner’s Report is incorrect here. Check out the ASET for the correct solution.
