Dual Delta and Epsilon in Options

Summary

The document raises a question about two option sensitivities: dual delta, described as the derivative of option price with respect to strike, and epsilon, described as sensitivity to dividend yield. It asks whether these measures have practical uses and whether dual delta can be interpreted as the probability that an option finishes in the money.

The text offers no explanation or answer and gives no pricing model, derivation, or evidence for the proposed probability interpretation. It also mentions the related claim that ordinary delta represents the probability of finishing in the money, but leaves that claim unexamined. The note identifies a useful topic in option risk measures while leaving the distinctions and assumptions for further study.

Key ideas

• Dual delta is described as the sensitivity of option price to strike.
• Epsilon is described as the sensitivity of option price to dividend yield.
• The document asks whether dual delta has a practical use.
• It questions whether dual delta or ordinary delta can be read as an in-the-money probability.
• No derivation, model assumptions, or answer is provided.

Tags

# Dual delta and epsilon


# Dual delta and epsilon












Hey I know that dual delta and epsilon are derivative of option price with respect to strike nad dividend yield respectively. Are they used for something or rather not? Because I heard that dual delta means the probability of finishing ITM but I have not found a justification why this is so. But I also heard that Delta represents probability of finishing ITM.

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