# Static vs Dynamic Hedging: when is each one used?

I understand that, in Static Hedging, you don't have to keep rebalancing the offsetting position(s) while in Dynamic Hedging you have to constantly keep re-adjusting it. What I'm not clear on is when is each one used? Is it that Static Hedging can only be used for linear payoffs while Dynamic Hedging is for non-linear ones? Or does it have to do with path-dependence of the payoffs?

Also, can someone please recommend a good book about Static/Dynamic hedging? (something other than Taleb's which I found a bit chaotic to follow).

Thanks.

• If you can statically replicate the payoff of a position at $$t=0$$, then putting on that hedge will insulate you from all risk coming from the contract. Payoff doesn't need to be linear - for example, you can perfectly replicate a call option using a put option and a futures contract