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Re: PUBLIC COMMENT PERIOD - Volatility and Option Pricing Parameters Proposal
Matt Simpson / CME Group
2 Oct 2007 10:54AM ETBased on this feedback we will alter the proposal to modify the definition of tag 811 and change the name from PriceDelta to OptionDelta. This tag will be used rather than a new OptionHedgeDelta field.
An option delta is defined as:
1. A value between -1 and 1
2. An expression of the change in the price of an option based on a movement in the price of the underlying
3. A value indicating the number of underlying equivalents necessary to create a delta neutral option position
> The GTC in discussions on this topic felt that the PriceDelta field (tag
> 811) was ambiguous in name, definition and usage and a new field with a
> definitive purpose is needed which clearly expresses that delta is the
> change in the price of an option based on the movement of the underlying
> - OptionHedgeDelta
>
> We should be willing to consider keeping tag 811 but perhaps change its
> name to the new proposed value of OptionHedgeDelta. PriceDelta does not
> precisely convey the purpose and use.
>
> Matt Simpson
>
> > I'm not convinced that OptionHedgeDelta needs to be a new field.
> > PriceDelta tag 811 is already used to represent the option's delta and
> > is a number between 0 and 1. The only difference for this
> > implementation that I see (compared to OCC's) is that it is multiplied
> > by negative 1 to indicate short hedging positions. I would recommend
> > that we use the PriceDelta and amend its description. Perhaps
> > something like, "Delta calculated from an option's price. May be
> > signed to indicate hedging ratio when used within the context of a
> > trade or position."
Re: PUBLIC COMMENT PERIOD - Volatility and Option Pricing Parameters Proposal
Matt Simpson / CME Group 2 Oct 2007 10:54AM ET
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