EXPERIMENT 03 / HEDGING & ALLOCATION
Does learned hedging help?
Put simple and learned strategies on the same paths. Explore the price of protection and the impact of trading costs.
Start with the question
How much protection does a more complex hedge buy?
Follow three changes, then test your own assumptions.
Explore the settingsChapter 1 of 3
Start with frictionless protection
Compare a frozen learned hedge with the conventional delta hedge and no hedge. First remove trading costs during evaluation to see the protection each strategy provides.
Lower loss is better. The far right of the chart shows the worst outcomes; negative loss represents a gain.
What stays fixed?
The same held-out random shocks, frozen neural policy, and delta benchmark. Training volatility remains at 20%, and the option premium stays fixed at its training-model value; policies are not retrained when a setting changes.
The terms, in plain language
- Hedge
- A position adjusted to offset changes in another exposure.
- Basis point (bp)
- One hundredth of a percentage point; 10 bps equals 0.1% per traded notional.
- Tail loss
- Here, the average loss in the worst 5% of simulated outcomes, measured in dollars per call on one share.
Loading reproducible evidence…
Your turn
Explore the settings.
Change one assumption at a time. Run a calculation to update the evidence, then inspect or download the result.
Loading across-seed evidence…