PT - JOURNAL ARTICLE AU - Jor Molchan AU - Fabrice Douglas Rouah TI - Where’s My Delta? AID - 10.3905/jwm.2011.13.4.068 DP - 2011 Jan 31 TA - The Journal of Wealth Management PG - 68--76 VI - 13 IP - 4 4099 - https://pm-research.com/content/13/4/68.short 4100 - https://pm-research.com/content/13/4/68.full AB - The increased use of over-the-counter derivatives such as barrier options has presented new challenges for writers of these options who wish to hedge their positions. Traditional delta and gamma hedges break down when the price of the underlying approaches the barrier. This is due to the wild behavior of the Greeks near and at the barrier, the result of the discontinuity in the barrier option value. Static and semi-static hedging techniques have been proposed as alternatives to delta and gamma hedging. These incur lower transaction costs and are less exposed to liquidity constraints, but they can be complicated to implement and they can be sensitive to changes in volatility. This article illustrates how delta and gamma hedges break down and explains one alternative static hedging technique.TOPICS: Options, statistical methods