Delta One

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[edit] Delta One

Delta One is a financial market activity consisting in trading non optional products that replicate their underlying without using leverage.

Delta

For an option, the delta measures the sensitivity to changes in the price of the underlying asset. The Δ of an instrument is the mathematical derivative of the option value V with respect to the underlyer's price, S.

"Delta One" products

A "delta one" product is a derivative with a linear, symmetric payoff profile. That is, not an option or a product with embedded options. Examples of delta one products are futures, forwards, trackers, linear certificates, swaps and FRAs. As these products price are mostly moving with their underlying asset and risk free rate, their delta will be close to 1.

Example

If Footsie 100 is moving up by 1%, the futures contract on this index will go up by 0.9% to 1.1%. Hence a delta equal to 1.

Delta One trading desk

Working on a Delta One trading desk is usually the entry level for a junior trader, because operations are simple and involve little risk taking compared to other trading activities.

Delta one in the news

The trader responsible to have carried out a £3.6 billion ($7.2 billion) loss, the biggest fraud in banking history recently uncovered was working on the Delta One desk of one of the leading French bank.

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