Alternatively you may launch this applet using Java WebStart. Minumum requirements: Java 1.5. Tested with Firefox and Safari.
This page illustrates that imperfect hedging induces deviation of the (terminal) value of the hedge portfolio from the option payoff. For hedging in discrete time the hedge minimizing the residual error is different from the delta hedge.
It serves as a companion to Chapter 7 of Mathematical Finance.
You may step through some predefined scenarios. (Currently not available)
© Copyright 2007 Christian P. Fries