It's also possible to analyse the skewness and kurtosis of the period of time PnL by using third and 4th times of $Y_t$ respectively. Presumably you will conclude that for two sequence with identical expectation and variance, you may favor the one particular with good skew or lower kurtosis, but it's possible not dependant upon the self confidence of the industry watch, etc..
$begingroup$ If you look at just a single case in point, it could seem like the frequency of hedging instantly consequences the EV/Avg(Pnl), like in your situation you explained in which hedging each and every minute proved for being a lot more lucrative.
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The online effect of all that is always that amplified delta hedging frequency does just have the smoothing impact on P/L more than prolonged more than enough time horizons. But like you indicate you might be subjected to just one-off or scarce mean reversion (or trend) results, but these dissipate in excess of significant samples.
$begingroup$ It truly is in fact. It really is Specifically fascinating within a portfolio in which you is often hedging some challenges and preserving Some others. $endgroup$
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At the conclusion of the working day, the EV/Avg(PNL) boils down to iv vs rv of stock. If People two are equivalent, then read more the EV/PNL will be the exact same for the two traders in spite of hedging frequency. The one change will be the variance in their PNL as described over.
$begingroup$ The data I have discovered about delta hedging frequency and (gamma) PnL on This web site and numerous Many others all reiterate the exact same point: that the frequency at which you delta-hedge only has an impact on the smoothness and variance of one's PnL.
As it's the pnl of your hedge that offsets the option premium. Please ignore variations on account of periodic vs ongoing for this issue. $endgroup$
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Those people two PnLs don't coincide. Which 1 do you believe can make more sense? Which is there a way to connect The 2?
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