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Barriers, Asians, and Lookbacks require hedging strategies that account for the history of the underlying price.
Balancing the daily cost of holding the position against potential gains from Gamma. The Complexity of Exotic Options
The trade-off between minimizing tracking error and controlling transaction costs. Hedging Vanilla Options
The primary goal of dynamic hedging is to maintain a "Greeks-neutral" position by frequently adjusting the underlying hedge as market conditions change.
Adjusting the portfolio to account for changes in implied volatility.
Exotic options introduce path-dependency and non-linear risks that make simple Delta hedging insufficient.
The foundation of most hedging strategies. It involves offsetting the price sensitivity of the option by holding a counter-position in the underlying asset.