Delta Hedging with the Modified Binomial Tree

Athos Brogi

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Delta hedging; Option (search for similar items in EconPapers)
JEL-codes: G13 (search for similar items in EconPapers)
Date: 2026-04
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