easy · FRM Part 1 Valuation and Risk Models
In option trading, the term 'dynamic hedging' refers to the process of:
- Investing surplus cash in risk-free bonds to offset the cost of option premiums.
- Purchasing multiple options that share the same strike but different expiration dates.
- Frequently rebalancing the Delta hedge as the underlying price moves.
- Selling options only during periods when implied volatility is elevated.
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