Greeks & Hedging

Read these first

1. 01Delta Hedging Frequency And Costs

   Black-Scholes assumes you can rehedge continuously for free. In reality every rehedge costs money, so a trader has to pick how often to touch the hedge, too rarely and the hedge tracks poorly, too often and fees eat the position alive.

2. 02Dynamic Vs Static Hedging

   A hedge you set up once and never touch again is a static hedge; one you have to keep rebalancing as the market moves is dynamic. The choice between them is a trade-off between transaction costs and model risk, not a question of which is 'better.'

3. 03Option Book PnL Attribution

   A trading book's profit or loss on any given day is one number. PnL attribution splits that number into the pieces the Greeks predicted, delta, gamma, theta, vega, plus whatever is left over, which is the part nobody can explain yet.

Then the rest

1. 04Aggregating Greeks Across A Portfolio
2. 05Dealer Gamma Exposure
3. 06Dollar Greeks And Position Scaling
4. 07Rho And Interest Rate Sensitivity
5. 08Adjoint Algorithmic Differentiation
6. 09Discrete Hedging Error
7. 10Gamma Hedging With Options
8. 11Leland's Model For Hedging With Costs
9. 12Minimum Variance Delta
10. 13Monte Carlo Greeks: Pathwise And Likelihood Ratio
11. 14Skew Risk And Smile Hedging
12. 15Vanna And Charm
13. 16Vega Bucketing And Term Structure Hedging