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2 results

  • Duality theory for exponential utility-based hedging in the Almgren–Chriss model

  • Part of
  • Yan Dolinsky
  • Journal:
    Journal of Applied Probability / Volume 61 / Issue 2 / June 2024
    Published online by Cambridge University Press:
    03 August 2023, pp. 420-438
    Print publication:
    June 2024
    • Article
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  • 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 the optimal trading strategy explicitly.

  • Optimal liquidation of a call spread

  • Part of
  • Erik Ekström, Carl Lindberg, Johan Tysk, Henrik Wanntorp
  • Journal:
    Journal of Applied Probability / Volume 47 / Issue 2 / June 2010
    Published online by Cambridge University Press:
    14 July 2016, pp. 586-593
    Print publication:
    June 2010
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  • We study the optimal liquidation strategy for a call spread in the case when an investor, who does not hedge, believes in a volatility that differs from the implied volatility. The liquidation problem is formulated as an optimal stopping problem, which we solve explicitly. We also provide a sensitivity analysis with respect to the model parameters.