LOS 30 e: Pg 201

Delta hedging a derivative position means combining the option position with a position in the underlying asset to form a portfolio, whose value does not change in reaction to changes in the price of the underlying over a short period of time. **The value of that portfolio should grow at the risk-free rate over time, as it is dynamically managed.**

Schweser book 4

LOS 29a Pg 140

It is also worthwhile to point out a basic relationship that underlies what we are doing when we replicate synthetic “cash.” We take a short position in futures to offset the risk in a long position in equity. This can be represented as follows:

**synthetic risk-free asset= long stock- stock index futures (i.e., short position**

Can anyone please explain what is the difference between both of the above techniques as the result is the same in both, which is risk free rate.

Thank you