- Joined
- 6/11/10
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- 28
I found the definition of delta with respect to an European option problematic:
(\frac{\partial C}{\partial S_t}=\frac{\partial}{\partial S_t}(S_t N(d1)-Ke^{-r(T-t)}N(d2))=N(d1))
while d1 and d2 are actually functions of S.
Shall we count in the derivatives of N(d1) and N(d2) ?
Or the partial derivative approach is just a heuristic explanation for Martingle Representation Theorem?
(\frac{\partial C}{\partial S_t}=\frac{\partial}{\partial S_t}(S_t N(d1)-Ke^{-r(T-t)}N(d2))=N(d1))
while d1 and d2 are actually functions of S.
Shall we count in the derivatives of N(d1) and N(d2) ?
Or the partial derivative approach is just a heuristic explanation for Martingle Representation Theorem?