CONSIDERATIONS TO KNOW ABOUT PNL

That is not the same as the pnl equalling the worth compensated, as a substitute the predicted pnl on the approach will be the same as the choice benefit. $endgroup$To help make The 2 solutions equivalent it is best to visualize investing/borrowing $PnL_1$ at level $r$ to make sure that it stays from the process until eventually $t_2,.$ At the mome

If you hedge each and every moment, You would not understand the entire pnl in the bigger SD moves however , you do capture the full pnl on the smaller intraday moves. Conversely, if You merely hedge as soon as on a daily basis, you won't realize the entire pnl from your smaller intraday moves (like in the instance) but you would in return comprehe