The Tracking Error Rate of the Delta-Gamma Hedging Strategy
42 Pages Posted: 31 Dec 2009
Date Written: July 2, 2009
We analyse the convergence rate of the quadratic tracking error, when a Delta-Gamma hedging strategy is used at N discrete times. The fractional regularity of the payoff function plays a crucial role in the choice of the trading dates, in order to achieve optimal rates of convergence.
Keywords: hedging strategies, fractional regularity, L2 convergence
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