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Re-hedge more often, or pay less in trading costs?

Asked at SIG, Jane Street

You delta-hedge a long-gamma option book. If you re-hedge nn times over the option's life, your hedging-error variance falls roughly like a/na/n, but each hedge costs a fixed amount, so total trading cost rises like cnc\,n.

Is there an optimal number of re-hedges? Roughly where does it sit?

Your answer

This one is open-ended. Work it through, then check your reasoning against the full solution.

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