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Delta Hedging with the Modified Binomial Tree

Author

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  • Brogi, Athos

Abstract

The delta hedging performances of the modified binomial tree (MBT) and the benchmark practitioner Black-Scholes (PBS) model are compared for both put and call options on the S&P 500 index. MBT performance is either better or about the same. Specifically, the MBT performs better for deep out of the money (DOTM), out of the money (OTM), at the money (ATM) puts and OTM calls, while performance is about the same for ATM calls and in the money (ITM) puts and calls. MBT performs better for puts than for calls.

Suggested Citation

  • Brogi, Athos, 2026. "Delta Hedging with the Modified Binomial Tree," MPRA Paper 128937, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:128937
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    File URL: https://mpra.ub.uni-muenchen.de/128937/1/MPRA_paper_128937.pdf
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    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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