Utility based optimal hedging in incomplete markets. (Q1872394): Difference between revisions

What is the optimal hedge of a contingent claim in an incomplete market? Optimality is understood here in terms of maximizing the expected utility. Alternatively, what is the optimal investment strategy (in an incomplete market) if you are short a contingent claim? This paper addresses, in a quite general setting, these questions and solves them if the utility function satisfies some ``reasonable'' asymptotic elasticity condition, and if the contingent claims are bounded.