Delta hedging on the trade contributed to the bid up in volatility.
That led to the sell-off in equities, likely exacerbated by forced selling by commodity trading advisers and by
delta hedging among those shorting options and volatility targeted strategies.
Specifically, option type dynamic
delta hedging, which is likely to increase the associated transactions costs, may be required.
So Leland suggested that no-arbitrage assumption is replaced by
Delta hedging strategy under the condition of discrete time occasions and transaction costs.
However, it ends with Thorpe starting a company eventually called Princeton-Newport Partners to engage in what is now called
delta hedging, selling the warrant short and buying the underlying security.
In order to analyze
delta hedging as the mean of managing option sensitivity and risk, an empirical situation was imitated and simulated.
Thus, a
delta hedging strategy may turn out to be very costly on a long maturity option, as high transaction costs are incurred due to the frequent rebalancing of the hedging portfolio.
Goldman Sachs Electronic Trading (GSET) (NYSE: GS) has announced that it has launched a new automated
Delta Hedging functionality.
Netto has published numerous articles and lectured on topics ranging from "Dynamically
Delta Hedging Your Option Portfolio," "Techniques and Methodologies for Equity Index Spread Trading," to the more qualitative issues as "The 10 Attributes of a Great Trader." Mr.