Related papers: General indifference pricing with small transactio…
We discuss the asymptotic behaviour of risk-based indifference prices of European contingent claims in discrete-time financial markets under volatility uncertainty as the number of intermediate trading periods tends to infinity. The…
We study utility indifference prices and optimal purchasing quantities for a contingent claim, in an incomplete semi-martingale market, in the presence of vanishing hedging errors and/or risk aversion. Assuming that the average indifference…
In this paper the valuation problem of a European call option in presence of both stochastic volatility and transaction costs is considered. In the limit of small transaction costs and fast mean reversion, an asymptotic expression for the…
In the context of the multi-dimensional infinite horizon optimal consumption-investment problem with proportional transaction costs, we provide the first order expansion in small transact costs. Similar to the one-dimensional derivation in…
This paper concerns the design of a Fourier based pseudospectral numerical method for the model of European Option Pricing with transaction costs under Exponential Utility derived by Davis, Panas and Zariphopoulou. Computing the option…
For incomplete preference relations that are represented by multiple priors and/or multiple -- possibly multivariate -- utility functions, we define a certainty equivalent as well as the utility buy and sell prices and indifference price…
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…
We consider the Bachelier model with linear price impact. Exponential utility indifference prices are studied for vanilla European options in the case where the investor is required to liquidate her position. Our main result is establishing…
Our goal is to analyze the system of Hamilton-Jacobi-Bellman equations arising in derivative securities pricing models. The European style of an option price is constructed as a difference of the certainty equivalents to the value functions…
We propose indifference pricing to estimate the value of the weak information. Our framework allows for tractability, quantifying the amount of additional information, and permits the description of the smallness and the stability with…
This work focuses on the indifference pricing of American call option underlying a non-traded stock, which may be partially hedgeable by another traded stock. Under the exponential forward measure, the indifference price is formulated as a…
We apply a utility-based method to obtain the value of a finite-time investment opportunity when the underlying real asset is not perfectly correlated to a traded financial asset. Using a discrete-time algorithm to calculate the…
We consider the Bachelier model with information delay where investment decisions can be based only on observations from $H>0$ time units before. Utility indifference prices are studied for vanilla options and we compute their non-trivial…
We study the dynamics of the exponential utility indifference value process C(B;\alpha) for a contingent claim B in a semimartingale model with a general continuous filtration. We prove that C(B;\alpha) is (the first component of) the…
This paper studies a finite-horizon portfolio selection problem with non-concave terminal utility and proportional transaction costs, in which the commonly used concavification principle for terminal value is no longer applicable. We…
In this paper, we construct the utility-based optimal hedging strategy for a European-type option in the Almgren-Chriss model with temporary price impact. The main mathematical challenge of this work stems from the degeneracy of the second…
This paper considers utility indifference valuation of derivatives under model uncertainty and trading constraints, where the utility is formulated as an additive stochastic differential utility of both intertemporal consumption and…
In financial markets valuable information is rarely circulated homogeneously, because of time required for information to spread. However, advances in communication technology means that the 'lifetime' of important information is typically…
In the general framework of a semimartingale financial model and a utility function $U$ defined on the positive real line, we compute the first-order expansion of marginal utility-based prices with respect to a ``small'' number of random…
We characterize the price of a European option on several assets for a very risk averse seller, in a market with small transaction costs as a solution of a nonlinear diffusion equation. This problem turns out to be one of asymptotic…