Consider a Black-Scholes setting.When a call option is deep in-the-money,an increase in volatility results in,ceteris paribus,
A)A decrease in the delta of the option.
B)A decrease in the insurance value of the option.
C)An increase in the intrinsic value of the option.
D)An increase in the time value of the option.

Question

Quizplus · Accepted Answer

This can be derived from the formula,but intuitively,when the option is deep ITM,delta is close to 1.If volatility increases,the option might be more likely to move to being less in the money.Hence,the delta decreases.

Consider a Black-Scholes Setting