Optimal investment with derivative securities

Aytaç Ílhan (), Mattias Jonsson () and Ronnie Sircar ()

Finance and Stochastics, 2005, vol. 9, issue 4, 585-595

Abstract: We consider an investor who maximizes expected exponential utility of terminal wealth, combining a static position in derivative securities with a traditional dynamic trading strategy in stocks. Our main result, obtained by studying the strict concavity of the utility-indifference price as a function of the static positions, is that, in a quite general incomplete arbitrage-free market, there exists a unique optimal strategy for the investor. Copyright Springer-Verlag Berlin/Heidelberg 2005

Keywords: Utility maximization; convex duality; incomplete markets; indifference price (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (19)

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DOI: 10.1007/s00780-005-0154-y

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