TL;DR
Delta Hedging: One-Step Replication: A canonical quantitative trading interview question at intermediate difficulty. Commonly asked at Optiver, SIG, IMC, Citadel Securities, Akuna Capital.
By Valenke Exam Prep Team·Last updated 2026-06-01
intermediateGame Theory & Strategy
Delta Hedging: One-Step Replication
Asked at: Optiver, SIG, IMC, Citadel Securities, Akuna Capital
Problem
A stock is currently at . In one period it will go to either (up) or (down). A European call with strike expires at the end of this period. The risk-free rate is per period.
(a) Find the replicating portfolio: how many shares and how much bond replicate the call?
(b) What is the fair call price?
(c) You sold the call for its fair price. The stock jumps to 60. What is your P&L?
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