Why Is ‘Perfect’ Delta-Neutral Hedging Impossible in Practice?

Perfect delta-neutral hedging is impossible because delta is constantly changing (Gamma risk), requiring continuous re-hedging, which is impractical due to transaction costs and discrete trading intervals. Furthermore, options models like Black-Scholes rely on assumptions (e.g. continuous trading, constant volatility) that are not met in the real world.

Finally, the discrete nature of the underlying asset's price movements prevents a truly continuous hedge.