What Is the Concept of "Dynamic Hedging" in Relation to Delta? ▴ Learn

What Is the Concept of “Dynamic Hedging” in Relation to Delta?

Dynamic hedging involves continuously or frequently adjusting the quantity of the underlying asset held to maintain a desired Delta for the overall portfolio. The goal is often to keep the portfolio Delta-neutral, thereby minimizing the risk associated with small price movements in the underlying asset.

This process is essential for market makers.

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