I'm simulating dynamic delta hedging for up-and-out call option. For plain vanilla call options, I heard that the option price is the expected value of the accumulated delta hedging cost. Does it also hold for exotic option, like up-and-out call options?


1 Answer 1



If you use the BS Model for computing deltas and the same model for evolving the stock price then you should replicate the pay-off of any contract.

  • $\begingroup$ Is it always possible to delta-hedge an exotic option in BS? $\endgroup$
    – SRKX
    Sep 29, 2015 at 8:18
  • $\begingroup$ yes -- every pay-off is replicable. $\endgroup$
    – Mark Joshi
    Sep 29, 2015 at 22:44

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Not the answer you're looking for? Browse other questions tagged or ask your own question.