Utility Indifference Hedging with Exponential Additive Processes
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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.
KeywordsUtility indifference pricing and hedging Minimal entropy martingale measure Exponential additive processes
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