Discrepancies between Javascript and Python

Question

I have an exam question where I have to find the delta of a put and a call option using the Black and Schole formula.

I found a website http://www.deltaquants.com/calc-test that does that for me, so I went in the code and found this function:

getDelta: function(spot, strike, volatility, riskfree, dividendy) {
    var self = this;
    var d1 = self.getD1(spot, strike, volatility, riskfree, dividendy);
    var Nd1 = phi(d1);
    // Interesting line
    var result = Math.exp( - dividendy * self.expiry) * (self.type !== 'put') ? Nd1 : (Nd1 - 1); 
    return result.toFixed(6);
}

I replicated that in Python:

def delta(q, t, nd1, put: bool):
    return np.exp(- q * t) * (nd1 - 1 * put)

print(delta(.02, .25, .5279031701805211, True)) # -0.46974223705768553
print(delta(.02, .25, .5279031701805211, False)) # 0.5252702421349968

With the same inputs (Nd1 = nd1, dividendy = q, self.expiry = t), the JS code returns -0.472097 for the put and 0.527903 for the call.

I rewrote their JS code to be testable in the console:

const delta = (q, t, nd1, type) => Math.exp(-q * t) * (type !== "put") ? nd1 : (nd1 - 1);

If you rewrite the JS the same way I did in python:

const delta2 = (q, t, nd1, put) => Math.exp(-q * t) * (nd1 - 1 * put);
// Where put is a boolean

You get the same results as my python code, it seems that the Mat.exp part is always disregarded in their code. Do you know why?

Luke Woodward · Accepted Answer · 2020-06-05 19:32:20Z

1

The problem is that the ternary operator (... ? ... : ...) has lower operator precedence than multiplication, so if you have an expression A * B ? C : D it gets parsed as if it were (A * B) ? C : D rather than A * (B ? C : D).

If you add parentheses to emphasise the way the expression gets parsed, you end up with this:

    var result = (Math.exp( - dividendy * self.expiry) * (self.type !== 'put')) ? Nd1 : (Nd1 - 1);
    //           ^-------------------- added parentheses ---------------------^

Here you can see that the expression involving Math.exp is in the condition of the ternary operator, and so the value of result will be either Nd1 or Nd1 - 1.

I suspect the intended calculation is

    var result = Math.exp( - dividendy * self.expiry) * ((self.type !== 'put') ? Nd1 : (Nd1 - 1));
    //                                                  ^---------- added parentheses ----------^

answered Jun 5, 2020 at 19:32

Luke Woodward

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1 Comment

Alexandre Senges Over a year ago

Thank you, that's a very confusing behavior! I wonder how many people lost money by using their website ahah

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