ML Engineer MasterClass (April) | 6 seats left

Optimal Hedging with Transaction Costs

Optimal Hedging with Transaction Costs

Problem Statement

The Question

Interview question: "You're delta-hedging a short European call under Black-Scholes assumptions. Walk me through why continuous delta hedging breaks down when transaction costs are present, then formulate the optimal hedging problem rigorously and describe at least one approach to solving it."

This question shows up at Goldman Sachs (Strats), JP Morgan (Quantitative...

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