Related papers: Utility based pricing and hedging of jump diffusio…
This paper considers the optimal portfolio selection problem in a dynamic multi-period stochastic framework with regime switching. The risk preferences are of exponential (CARA) type with an absolute coefficient of risk aversion which…
This paper considers exponential utility indifference pricing for a multidimensional non-traded assets model, and provides two linear approximations for the utility indifference price. The key tool is a probabilistic representation for the…
We approximate the price of the American put for jump diffusions by a sequence of functions, which are computed iteratively. This sequence converges to the price function uniformly and exponentially fast. Each element of the approximating…
This paper extends the results of the article [C. Kl\"{u}ppelberg and S. M. Pergamenchtchikov. Optimal consumption and investment with bounded downside risk for power utility functions. In Optimality and Risk: {\it Modern Trends in…
This paper considers exponential utility indifference pricing for a multidimensional non-traded assets model subject to inter-temporal default risk, and provides a semigroup approximation for the utility indifference price. The key tool is…
The paper studies the robust maximization of utility of terminal wealth in the diffusion financial market model. The underlying model consists with risky tradable asset, whose price is described by diffusion process with misspecified trend…
This paper explores the application and significance of the second-order Esscher pricing model in option pricing and risk management. We split the study into two main parts. First, we focus on the constant jump diffusion (CJD) case,…
We consider the problem of optimal investment and consumption in a class of multidimensional jump-diffusion models in which asset prices are subject to mutually exciting jump processes. This captures a type of contagion where each downward…
We study the utility indifference price of a European option in the context of small transaction costs. Considering the general setup allowing consumption and a general utility function at final time T, we obtain an asymptotic expansion of…
We consider insurance derivatives depending on an external physical risk process, for example a temperature in a low dimensional climate model. We assume that this process is correlated with a tradable financial asset. We derive optimal…
We study the hedging and valuation of European and American claims on a non-traded asset $Y$, when a traded stock $S$ is available for hedging, with $S$ and $Y$ following correlated geometric Brownian motions. This is an incomplete market,…
We review the utility-based valuation method for pricing derivative securities in incomplete markets. In particular, we review the practical approach to the utility-based pricing by the means of computing the first order expansion of…
This paper examines the valuation and hedging of standard equity protection swap (EPS) products proposed by Xu et al.. To account for financial crises and counterparty default risk, we develop pricing frameworks based on Merton's…
This paper studies the problem of maximizing the expected utility of terminal wealth for a financial agent with an unbounded random endowment, and with a utility function which supports both positive and negative wealth. We prove the…
We consider the problem of option hedging in a market with proportional transaction costs. Since super-replication is very costly in such markets, we replace perfect hedging with an expected loss constraint. Asymptotic analysis for small…
In this article we consider an optimization problem of expected utility maximization of continuous-time trading in a financial market. This trading is constrained by a benchmark for a utility-based shortfall risk measure. The market…
One of the shortcomings of the Black and Scholes model on option pricing is the assumption that trading of the underlying asset does not affect the price of that asset. This assumption can be fulfilled only in perfectly liquid markets.…
We consider the problem of exponential utility indifference valuation under the simplified framework where traded and nontraded assets are uncorrelated but where the claim to be priced possibly depends on both. Traded asset prices follow a…
We give a complete solution to the problem of minimizing the expected liquidity costs in presence of a general drift when the underlying market impact model has linear transient price impact with exponential resilience. It turns out that…
We present an option pricing formula for European options in a stochastic volatility model. In particular, the volatility process is defined using a fractional integral of a diffusion process and both the stock price and the volatility…