What is Gamma Hedging

What is Gamma Hedging?

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Gamma hedging: To reduce the size of each rehedge or/and to rise the time among rehedges, and therefore reduce costs, the technique of gamma hedging is frequently employed. A portfolio which is delta hedged is insensitive to movements in the underlying so long as those movements are rather small. There is a small error into this because of the convexity of the portfolio regarding the underlying.

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