What is the reason for undertaking a gamma hedge?
A)government regulation
B)the possibility of counterparty default
C)changes in volatility
D)large movements in the underlying
E)none of the above

Question

Quizplus · Accepted Answer

Gamma hedging is undertaken to protect against large movements in the underlying asset, as gamma measures the rate of change of delta, which is affected by such movements.

What Is the Reason for Undertaking a Gamma Hedge