Duality Theory for Exponential Utility--Based Hedging in the Almgren--Chriss Model
Mathematical Finance
2023-06-06 v3 Portfolio Management
Abstract
In this paper, we obtain a duality result for the exponential utility maximization problem where trading is subject to quadratic transaction costs and the investor is required to liquidate her position at the maturity date. As an application of the duality, we treat utility-based hedging in the Bachelier model. For European contingent claims with a quadratic payoff, we compute explicitly the optimal trading strategy.
Keywords
Cite
@article{arxiv.2210.03917,
title = {Duality Theory for Exponential Utility--Based Hedging in the Almgren--Chriss Model},
author = {Yan Dolinsky},
journal= {arXiv preprint arXiv:2210.03917},
year = {2023}
}