Delta Hedging without the Black-Scholes Formula
Abstract
Description
We introduce a new method of delta hedging. In many cases, this method results in a lower cost than the Black-Scholes method. To calculate the cost of hedging, we develop a Mathematica program that include the two-dimensional Newton-Raphson method.
5 pages Ver. 2: In addition, when K=35 (deep in the money), the difference between these costs is within 0.1%
5 pages Ver. 2: In addition, when K=35 (deep in the money), the difference between these costs is within 0.1%