Related papers: The indifference value of the weak information
In the context of an incomplete market with a Brownian filtration and a fixed finite time horizon, this paper proves that for general dynamic convex risk measures, the buyer's and seller's risk indifference prices of a contingent claim are…
We price a contingent claim liability using the utility indifference argument. We consider an agent with exponential utility, who invests in a stock and a money market account with the goal of maximizing the utility of his investment at the…
We study the dynamic indifference pricing with ambiguity preferences. For this, we introduce the dynamic expected utility with ambiguity via the nonlinear expectation--G-expectation, introduced by Peng (2007). We also study the risk…
We investigate a pricing rule that is applicable for streams of income or contingent claim liabilities and study how this rule changes under additional insider-type information that an investor might obtain. Considering a model where the…
We propose a model to study the effects of delayed information on option pricing. We first talk about the absence of arbitrage in our model, and then discuss super replication with delayed information in a binomial model, notably, we…
It is well known that the minimal superhedging price of a contingent claim is too high for practical use. In a continuous-time model uncertainty framework, we consider a relaxed hedging criterion based on acceptable shortfall risks.…
We review the nature of some well-known phenomena such as volatility smiles, convexity adjustments and parallel derivative markets. We propose that the market is incomplete and postulate the existence of intrinsic risks in every contingent…
We consider the pricing problem of a seller with delayed price information. By using Lagrange duality, a dual problem is derived, and it is proved that there is no duality gap. This gives a characterization of the seller's price of a…
We consider utility maximization problem for semi-martingale models depending on a random factor $\xi$. We reduce initial maximization problem to the conditional one, given $\xi=u$, which we solve using dual approach. For HARA utilities we…
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 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 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 develop a model for indifference pricing in derivatives markets where price quotes have bid-ask spreads and finite quantities. The model quantifies the dependence of the prices and hedging portfolios on an investor's beliefs, risk…
We study the pricing of credit derivatives with asymmetric information. The managers have complete information on the value process of the firm and on the default threshold, while the investors on the market have only partial observations,…
We consider decision-making under incomplete information about an unknown state of nature. We show that a decision problem yields a higher value of information than another, uniformly across information structures, if and only if it is…
Information and uncertainty are closely related and extensively studied concepts in a number of scientific disciplines such as communication theory, probability theory, and statistics. Increasing the information arguably reduces the…
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…
In decision problems under incomplete information, actions (identified to payoff vectors indexed by states of nature) and beliefs are naturally paired by bilinear duality. We exploit this duality to analyze the value of information, using…
We address the question of whether price of stability results (existence of equilibria with low social cost) are robust to incomplete information. We show that this is the case in potential games, if the underlying algorithmic social cost…
We study indifference pricing of exotic derivatives by using hedging strategies that take static positions in quoted derivatives but trade the underlying and cash dynamically over time. We use real quotes that come with bid-ask spreads and…