Utility Based Hedging in Incomplete Markets
Dr Mark Owen, Department of Actuarial Mathematics and Statistics, Heriot-Watt University, Edinburgh

Abstract:
Using duality methods, we investigate a classical problem of optimal investment in a semimartigale financial market for an investor who holds a short position in a contingent claim. The investor's credit limit is restricted by means of their utility function, and a critical weakening of the concept of an admissible portfolio. Under assumptions of reasonable asymptotic elasticity on the investor's utility function, an optimal investment theorem is presented with a simultaneous treatment of the relevant dual problem.