We consider an investor who maximizes expected exponential utility of terminal wealth, combining a static position in derivative securities with a traditional dynamic trading strategy in stocks. Our main result, obtained by studying the strict concavity of the utility-indifference price as a function of the static positions, is that, in a quite general incomplete arbitrage-free market, there exists a unique optimal strategy for the investor.
All Science Journal Classification (ASJC) codes
- Statistics and Probability
- Statistics, Probability and Uncertainty
- Convex duality
- Incomplete markets
- Indifference price
- Utility maximization