A note on super-hedging for investor-producers

Adrien Nguyen Huu ()
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Adrien Nguyen Huu: CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique, FiME Lab - Laboratoire de Finance des Marchés d'Energie - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CREST - EDF R&D - EDF R&D - EDF - EDF
Authors registered in the RePEc Author Service: Adrien Nguyen-Huu

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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 Ràsonyi (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.

Keywords: markets with proportional transaction costs; non-linear returns; arbitrage pricing theory; super-replication theorem; electricity markets; energy derivatives (search for similar items in EconPapers)
Date: 2013-06-01
Note: View the original document on HAL open archive server: https://hal.science/hal-00653982v3
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Published in Mathematics and Financial Economics, 2013, 7 (3), pp.341--357. ⟨10.1007/s11579-012-0080-7⟩

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Working Paper: A note on super-hedging for investor-producers (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00653982

DOI: 10.1007/s11579-012-0080-7

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