Static options replication for a portfolio of American options on a stock involves
A. Finding a hedge portfolio to match daily changes
B. Finding a hedge portfolio to match values on a boundary that is certain to be reached
C. Finding a hedge portfolio to match values at one particular time
D. Constructing a hedge taking both gamma and delta into account
B
Static option replication involves finding a hedge portfolio that matches values on some boundary in {S,t} space that is certain to be crossed eventually. Once the boundary is reached the hedge must be unwound and a new hedge created.
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