What is volatility trading?
In this post I would like to discuss a practical approach to implement the delta-hedging for volatility trading strategies. While it is customary to assume a continuous-time hedging in most of the industrial applications and academic literature, the delta-hedging in practice is applied in the discrete time setting. As a result, to optimise the delta-hedging for the practical implementation, we need to consider the discrete time framework. That is why I would like to highlight some of my research and discuss my approach under the discrete time setting and the transaction costs to optimize the delta-hedging.