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   Spot Versus Forward Delta Hedge
   















 

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Spot Versus Forward Delta Hedge

An adjustment in the size of a hedging position to allow for the effect of cost of carry on the forward price. The adjustment can be made on the delta of the position or on the forward price or rate. If the adjustment is made on the delta, the spot delta is multiplied by 1 + basis (with basis expressed as a rate or decimal fraction of the underlying) and the resulting forward delta is used to compute the size of the position to be taken in the forward or futures market.

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