Vol-5-Reading 43 Delta Hedging of Option- When calculating the value of the delta hedged options- shouldnt the market value of options and not the value as per Black-Scholes be the basis.
i would have thought that you’re trying to hedge the current value of your position - so it should be based on the current market value (price) also because you need to balance the hedge with cash or loan (at the RFR) I guess you could use BSM to value an option if there were no available options in the market or if there is no market for the options you have, but since here you are trying to hedge a current existing option position you would use the current market value as a starting point. Then from that calculate the underlying required + the cash/loan balance. (just guessin’ here, sorry)