Suppose you are long a TRYJPY call option. And lets say you can delta hedge using USDTRY, AUDJPY, and AUDUSD.
In this case I would delta hedge by buying USDTRY, selling AUDJPY, and buying AUDUSD.
If this were to be the case, I am creating correlation risk between these currency pairs?
Also, if we were to delta hedge using just USDTRY and USDJPY, would this eliminate the correlation risk?
This example is kind of odd to me as correlation risk is created without having any basket options on the book.