A note on super-hedging for investor-producers

Adrien Nguyen-Huu

Papers from arXiv.org

Abstract: We study the situation of an agent who can trade on a financial market and can also transform some assets into others by means of a production system, in order to price and hedge derivatives on produced goods. This framework is motivated by the case of an electricity producer who wants to hedge a position on the electricity spot price and can trade commodities which are inputs for his system. This extends the essential results of Bouchard & Nguyen Huu (2011) to continuous time markets. We introduce the generic concept of conditional sure profit along the idea of the no sure profit condition of R\`asonyi (2009). The condition allows one to provide a closedness property for the set of super-hedgeable claims in a very general financial setting. Using standard separation arguments, we then deduce a dual characterization of the latter and provide an application to power futures pricing.

Date: 2011-12, Revised 2012-03
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Working Paper: A note on super-hedging for investor-producers (2013)
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