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Suppose we have a stock $X$ at which trades at 100 dollars. We suppose the stock follows a geometric brownian motion. We know that the interest rate is zero and annual volatility is 10 percent. How can we hedge the risk?

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Delta hedging of a vanilla European option on X? – pincopallino Apr 9 '14 at 7:37
It is not really clear what you are trying to hedge - an option? If yes- which one ? – Probilitator Apr 9 '14 at 9:17
Please tell us what your are asking. – Richard Apr 14 '14 at 8:11
There may be an option somewhere.... – Were_cat Jul 9 '14 at 22:55

You sell your stock $S$ against some cash.

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correct answer ... – Richard Jul 9 '14 at 8:26

You need a risk model to understand the sources of risk for your stock. If the risk factors can be traded then you can use the factor loadings to hedge your risk.

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This is only true if the factor are investable. This is a geometric Brownian motion - this is theoretical only. – Richard Jul 9 '14 at 8:25

You first need to define "hedge". Or else the question remains undefined, and the minimum risk is achieved not trading at all ;-)

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