Exponential Hedging for the Ornstein-Uhlenbeck Process in the Presence of Linear Price Impact

In this work we study a continuous time exponential utility maximization problem in the presence of a linear temporary price impact.

More precisely, for the case where the risky asset is given by the Ornstein-Uhlenbeck diffusion process we compute the optimal portfolio strategy and the corresponding value.

Our method of solution relies on duality, and it is purely probabilistic.