In finance, a derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset or set of assets such as security and index, respectively. Q3 What is the derivative formula? The derivative of a function y = f(x) can be expressed as ...
Similarly, to enter the long delta position needed to hedge a short call, the dealer could finance the purchase by lending the stock in a reverse repo transaction. Effectively, the delta position in the underlying stock would be funded at the prevailing repo rate. Thus, once the delta hedge...