Hedging a Long Position
Delta Factor - At-The-Money-Put
Change in the Delta Factor
Fixed Hedge Formula
Comparing Delta Hedging to Fixed Hedging
The Final table
Whereas fixed hedging limits the loss potential of the hedge to the premium, the aim of delta hedging is to establish a hedge, which at every moment and price of the underlying generates a loss as close to zero as possible. However, delta hedging is based on the assumption that the delta factor behaves as expected, which is not always the case.