Does a Delta-Neutral Portfolio Eliminate All Risk?
No, a delta-neutral portfolio only eliminates the risk associated with small, directional movements in the underlying asset's price. It does not eliminate Gamma risk (risk from large price moves), Vega risk (volatility risk), Theta risk (time decay), or Rho risk (interest rate risk).
It also remains exposed to liquidity risk, counterparty risk, and model risk.
