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Robust Exponential Hedging in a Brownian Setting

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  • Keita Owari

Abstract

This paper studies the robust exponential hedging in a Brownian factor model, giving a solvable example using a PDE argument. The dual problem is reduced to a standard stochastic control problem, of which the HJB equation admits a classical solution. Then an optimal strategy will be expressed in terms of the solution to the HJB equation.

Suggested Citation

  • Keita Owari, 2009. "Robust Exponential Hedging in a Brownian Setting," Global COE Hi-Stat Discussion Paper Series gd09-082, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hst:ghsdps:gd09-082
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    File URL: http://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd09-082.pdf
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    References listed on IDEAS

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    1. Daniel Hernandez–Hernandez & Alexander Schied, 2005. "Robust Utility Maximization in a Stochastic Factor Model," SFB 649 Discussion Papers SFB649DP2006-007, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany, revised Aug 2006.
    2. Hernández-Hernández, Daniel & Schied, Alexander, 2007. "A control approach to robust utility maximization with logarithmic utility and time-consistent penalties," Stochastic Processes and their Applications, Elsevier, vol. 117(8), pages 980-1000, August.
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    Cited by:

    1. Sigrid Källblad, 2017. "Risk- and ambiguity-averse portfolio optimization with quasiconcave utility functionals," Finance and Stochastics, Springer, vol. 21(2), pages 397-425, April.
    2. Sigrid Kallblad, 2013. "Risk- and ambiguity-averse portfolio optimization with quasiconcave utility functionals," Papers 1311.7419, arXiv.org.

    More about this item

    Keywords

    Robust Utility Maximization; Stochastic Control; Duality;

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