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Medium · options_pricing · Quant Researcher interview question · options-pricing, black-scholes, delta-hedging, simulation
Discrete delta-hedging is a core risk management technique for options market-makers, used to replicate an option's payoff by trading the underlying asset. The final hedging error—the difference between the option payoff and the cumulative hedge P&L—quantifies the cost of discrete rebalancing versus the continuous-time ideal. This metric is crucial for backtesting hedging strategies and calibrating rebalancing frequencies. Task Implement the function solution(S: list, K: float, T: float, r: flo