Hi,
I have a feeling that using Delta is not the most optimal way to hedge
or create neutral strategies when the delta is not a constant. Delta
deals with small movements but in "wild" markets such movements would
be large before the opportunity to rebalance. Even if rebalancing is
done it would be very frequent and the transaction cost would be
large. I would advocate strategies which would consider the completer
evolution of the Greeks and discretaised influence when a value
suddenly jumps. The values that make large discrete jumps could be
interest rates and dividend payments, while price could make small and
mid size jumps depending on liquidity.
Best regards, Suminda Sirinath Salpitikorala Dharmasena
