Pseudo Linear Pricing Rule for Utility Indifference Valuation
Portfolio Management
2014-04-01 v1 Probability
Abstract
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 utility indifference price by the solution of a functional differential equation, which is termed \emph{pseudo linear pricing rule}. We also provide an alternative derivation of the quadratic BSDE representation for the utility indifference price.
Cite
@article{arxiv.1403.7830,
title = {Pseudo Linear Pricing Rule for Utility Indifference Valuation},
author = {Vicky Henderson and Gechun Liang},
journal= {arXiv preprint arXiv:1403.7830},
year = {2014}
}
Comments
21 pages. arXiv admin note: text overlap with arXiv:1111.3856