Optimal hedging with variational preferences under convex risk measures

Marcelo Righi

Quantitative Finance, 2024, vol. 24, issue 11, 1703-1709

Abstract: We expose a theoretical hedging optimization framework with variational preferences under convex risk measures. We explore a general dual representation for the composition between risk measures and utilities. We study the properties of the optimization problem as a convex and monotone map per se. We also derive results for optimality and indifference pricing conditions. We also explore particular examples inside our setup.

Date: 2024
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DOI: 10.1080/14697688.2024.2416981

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