Related papers: Bond indifference prices and indifference yield cu…
We consider a general local-stochastic volatility model and an investor with exponential utility. For a European-style contingent claim, whose payoff may depend on either a traded or non-traded asset, we derive an explicit approximation for…
This paper addresses a critical inconsistency in models of the term structure of interest rates (TSIR), where zero-coupon bonds are priced under risk-neutral measures distinct from those used in equity markets. We propose a unified TSIR…
This paper formulates an utility indifference pricing model for investors trading in a discrete time financial market under non-dominated model uncertainty. The investors preferences are described by strictly increasing concave random…
In this paper we study the pricing and hedging of structured products in energy markets, such as swing and virtual gas storage, using the exponential utility indifference pricing approach in a general incomplete multivariate market model…
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…
A pricing formula for discount bonds, based on the consideration of the market perception of future liquidity risk, is established. An information-based model for liquidity is then introduced, which is used to obtain an expression for the…
We apply the concepts of utility based pricing and hedging of derivatives in stochastic volatility markets and introduce a new class of "reciprocal affine" models for which the indifference price and optimal hedge portfolio for pure…
In traditional financial markets, yield curves are widely available for countries (and, by extension, currencies), financial institutions, and large corporates. These curves are used to calibrate stochastic interest rate models, discount…
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…
We consider the problem of pricing derivatives written on some industrial loss index via utility indifference pricing. The industrial loss index is modelled by a compound Poisson process and the insurer can adjust her portfolio by choosing…
In this article, we look at the effect of volatility clustering on the risk indifference price of options described by Sircar and Sturm in their paper (Sircar, R., & Sturm, S. (2012). From smile asymptotics to market risk measures.…
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…
In this paper, we study the exponential utility indifference pricing of pure endowment policies within a stochastic-factor model for an insurer who also invests in a financial market. Our framework incorporates a hazard rate modeled as an…
We study utility indifference prices and optimal purchasing quantities for a non-traded contingent claim in an incomplete semi-martingale market with vanishing hedging errors. We make connections with the theory of large deviations. We…
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…
We consider the optimal investment problem when the traded asset may default, causing a jump in its price. For an investor with constant absolute risk aversion, we compute indifference prices for defaultable bonds, as well as a price for…
In this paper we investigate the pricing problem of a pure endowment contract when the insurer has a limited information on the mortality intensity of the policyholder. The payoff of this kind of policies depends on the residual life time…
We consider the Bachelier model with linear price impact. Exponential utility indifference prices are studied for vanilla European options and we compute their non-trivial scaling limit for a vanishing price impact which is inversely…
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…
This study delves into the temporal dynamics within the equity market through the lens of bond traders. Recognizing that the riskless interest rate fluctuates over time, we leverage the Black-Derman-Toy model to trace its temporal…