  This study derives the expected liquidity cost when performing the delta
hedging process of a European option. This cost is represented by an
integration formula that includes European option prices and a certain function
depending on the delta process. We first define a unit liquidity cost and then
show that the liquidity cost is a multiplication of the unit liquidity cost,
stock price, supply curve parameter, and the square of the number of options.
Using this formula, the expected liquidity cost before hedging can be
calculated much faster than when using a Monte Carlo simulation. Numerically
computed distributions of liquidity costs in special cases are also provided.
