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Delta hedging: It is one of the building blocks of derivatives theory. This is the theoretically ideal elimination of all risk using a very clever hedge among the option and its underlying. Delta hedging exploits the ideal correlation among the changes in the option value and the changes into the stock price. It is an illustration of ‘dynamic’ hedging; the hedge should be continually monitored and often adjusted by the sale or purchase of the underlying asset. Due to the frequent re-hedging, any dynamic hedging strategy is going to result into losses because of transaction costs. In several markets this can be very significant.