Target Weight Mechanism doesn’t make delta hedge easier
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摘要
This paper refutes Chitra et al. (2025)’s claim that a Target Weight Mechanism (TWM) can uniformly reduce the pool delta: it shows the condition used for delta reduction is self-contradictory (Theorem 1) and proves an impossibility result that no TWM can achieve a uniform delta shrinkage under a mild change-of-numeraire homogeneity assumption (Theorem 2) [page::0][page::2][page::3]
