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Three Essays on Exponential Hedging with Variable Exit Times

In: Inspired by Finance

Author

Listed:
  • Tahir Choulli

    (University of Alberta, Mathematical and Statistical Sciences Dept.)

  • Junfeng Ma

    (University of Alberta, Mathematical and Statistical Sciences Dept.)

  • Marie-Amélie Morlais

    (Université du Maine, Département de Mathématiques)

Abstract

This paper addresses three main problems that are intimately related to exponential hedging with variable exit times. The first problem consists of explicitly parameterizing the exponential forward performances and describing the optimal solution for the corresponding utility maximization problem. The second problem deals with the horizon-unbiased exponential hedging. Precisely, we are interested in describing the dynamic payoffs for which there exists an admissible strategy that minimizes the risk—in the exponential utility framework—whenever the investor exits the market at stopping times. Furthermore, we explicitly describe this optimal strategy when it exists. Our last contribution is concerned with the optimal sale problem, where the investor is looking simultaneously for the optimal portfolio and the optimal time to liquidate her assets.

Suggested Citation

  • Tahir Choulli & Junfeng Ma & Marie-Amélie Morlais, 2014. "Three Essays on Exponential Hedging with Variable Exit Times," Springer Books, in: Yuri Kabanov & Marek Rutkowski & Thaleia Zariphopoulou (ed.), Inspired by Finance, edition 127, pages 117-158, Springer.
    • Handle: RePEc:spr:sprchp:978-3-319-02069-3_7
    DOI: 10.1007/978-3-319-02069-3_7
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