At its simplest the delta of a trade or position is the ratio of its change in value to the change in value of its underlier 


More accurately the delta is the ratio or sensitivity of the change in trade trade value to any variable, market value or observable

For example a simple Physical Forward trade has a sensitivity to:

  • The price of the underlier
  • The interest rate
  • The FX rate of the currency it was executed in to our base reporting currency

So the delta is the ratio of the change in value of the trade per unit volume (e.g. €/MWh) to the change in value of a market value or underlier (e.g. the underlier power price quoted in €/MWh) to give a dimensionless ratio

You may come across a use of Delta as the ratio of the change in total value of the trade (e.g. €) to the change in price of the underlier (e.g. €/MWh) to give a value with units of volume, in this case MWh. This definition of delta is usually referred to as the Exposure, and may also be thought of as the delta above multiplied by the volume

The delta of fixed price Forwards and Futures is about one

The delta of options varies between 0 and 1 (or -1 to +1)

Exposures are additive - they can be summed across a set of trades or portfolios

Deltas are not additive - because they are dimensionless ratios

Delta is one of the Greeks - usually the most important Greek for trades with no optionality 

» Detailed Glossary