question in 08 practice exam about hedging

[itsyourz]

second part of 08 practice exam, page 63 number 7

i dont get it why put delta should be used

is it because change in put delta is plus? as stock price decreases

moreover, why option delta is used even though hedging strategy is index futures?

thanks

suk

 

[David Harper CFA FRM]

Hi suk,

I think this is the same as FRM 2006 practice question. Please see here. If not, please let me know

David