A moment based analysis of hedging under discrete trading

This paper analyzes the performance of two hedging strategies on three different options when trading is limited to take place at discrete times. Specifically, we compare the mean, standard deviation, skewness, and kurtosis of the hedging error resulting from applying a delta hedge and mean square optimal hedge to a European call option, a digital call option, and a down-and-out barrier call option. The results indicate that the two hedges perform equally well on the European call option and digital option, but the mean square optimal hedge is superior when hedging the barrier option.