Is Delta Hedging Easier or More Difficult for Exotics? We can approach the hedging of exotic options by creating a delta-neutral position and rebalancing frequently to maintain delta neutrality. When we do this, we find that some exotic options are easier to hedge than plain vanilla options and some are more difficult. An example of an exotic option that is relatively easy to hedge is an average price call option (see Asian options in Section 5.7). As time passes, we observe more of the asset prices that will be used in calculating the final average. This means that our uncertainty about the payoff decreases with the passage of time. As a result, the option becomes progressively easier to hedge. In the final few days, the delta of the option always approaches zero because price movements during this time have very little impact on the payoff. By contrast, barrier options (see Section 5.7) are relatively difficult to hedge. Consider a knock-out call option on a currency when the exchange rate is 0.0005 above the barrier. If the barrier is hit, the option is worth nothing. If the barrier is not hit, the option may prove to be quite valuable. The delta of the option is discontinuous at the barrier, making conventional hedging very difficult