Option Greeks: Calculating and Interpreting Sensitivities for Hedging
Students frequently conflate Delta-neutrality with total risk elimination. While Delta-hedging mitigates first-order directional risk, it remains exposed to Gamma (convexity risk) and Vega (volatility risk), meaning the portfolio can still suffer significant losses during high-volatility regimes or sharp 'jumps' in the underlying asset price.
Institutional Reference: Advanced Stochastic Processes
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