We consider the problem of hedging a European contingent claim in a Bachelier model with transient price impact as … proposed by Almgren and Chriss. Following the approach of Rogers and Singh [24] and Naujokat and Westray, the hedging problem … can be regarded as a cost optimal tracking problem of the frictionless hedging strategy. We solve this problem explicitly …

This paper analyzes optimal hedging of a tradable risk (e.g. price risk or exchange rate risk) with forward contracts … noise, cross hedging and speculating on the real risk premium are conflicting objectives; the level of relative risk …