【Abstract】This paper investigates the trade-off between avoiding portfolio risk and increasing transaction costs in dynamic hedging strategy. In dynamic hedging strategy， although adjusting positions frequently can reduce the risk of portfolio， it inevitably leads to outrageous trading cost. Applying the economic value function， this paper quantifies the value of avoided risk and compares it with the corresponding transaction costs. In this way， decisions can be made at each point， that is， investors can determine whether to dynamically adjust their positions or maintain original positions， thus optimizing the hedging strategy. Furthermore， the empirical results confirm that the strategy modified by economic value is more effective than traditional hedging strategy. By analyzing hedging strategies of different position adjustment cycle， it is proved that the efficiency of dynamic hedging strategy can be improved through economic value modified.

（原文刊于《Romanian Journal of Economic Forecasting》2016，19(2)，pp.86-101.）