Offsetting an option's delta with a position in the underlying so that small price moves leave value unchanged. It must be rebalanced as delta changes.
Where you will meet it
Delta hedging comes up in 4 learning outcome notes across the FRM syllabus.
A few of them:
Exotic Options FRM Part I · Financial markets and products
“The benefit is avoiding delta hedging near a barrier, but the approach depends on the model assumptions.”
Option Sensitivity Measures: The “Greeks” FRM Part I · Valuation and risk models
“The exam point is that stop-loss is easy but unreliable, and delta hedging replaces it.”
Liquidity Risk FRM Part II · Liquidity and treasury risk measurement and management
“Examples are stop-loss rules, portfolio insurance, and the delta hedging of short option positions (negative gamma).”
Option Sensitivity Measures: The “Greeks” FRM Part I · Valuation and risk models
“A delta hedge makes a position insensitive to small price moves by holding the underlying in proportion to the option's delta.”
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