Utility Indifference Pricing with High Risk Aversion and Small Linear Price Impact
Mathematical Finance
2022-01-07 v2 Portfolio Management
Abstract
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 proportional to the risk aversion. Moreover, we find explicitly a family of portfolios which are asymptotically optimal.
Keywords
Cite
@article{arxiv.2111.00451,
title = {Utility Indifference Pricing with High Risk Aversion and Small Linear Price Impact},
author = {Yan Dolinsky and Shir Moshe},
journal= {arXiv preprint arXiv:2111.00451},
year = {2022}
}