Estimation of Delta in derivatives

CFA Level II Portfolio Management
#1

In Question 8 of the CFAI EOC for Reading 49 in SS 17, the answer uses N(d1) from Black Scholes model to approximate delta for calls, and N(d1)-1 for delta of puts in Question 10. Just wondering where do these estimation come from? I can’t seem to find it in either CFAI books or in Schweser. Or maybe we should just memorise them?

Thanks!

#2

Ok just found it under Binomial Model. Don’t bother.

#3

Nd1 is the probability value, and it was gotten by first calculating your d1.

Based on the figure of the example you highlighted, d1 = 0.4489, so we have to round it up to 2 decimal places to make it 0.45.

So, under the nomal distribution table, you will look for the number corresponding to 0.4 under 0.05 to get Nd1.

Then you have your call option Delta.

Hope that helps.