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Utility indifference hedging with exponential additive processes

By Thorsten Rheinlander and Gallus Steiger

Abstract

We determine the exponential utility indifference price and hedging strategy for contingent claims written on returns given by exponential additive processes. We proceed by linking the pricing measure to a certain second-order semi-linear Integro-PDE. As main application, we study the problem of hedging with basis risk

Topics: HA Statistics
Publisher: Elsevier
Year: 2010
DOI identifier: 10.1007/s10690-009-9106-4
OAI identifier: oai:eprints.lse.ac.uk:31861
Provided by: LSE Research Online
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