Utility Indifference Pricing with High Risk Aversion and Small Linear Price Impact
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.
Code (0)
등록된 구현이 없습니다.
Similar Papers 제목 키워드 기반
Dynamic indifference pricing via the G-expectation
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 st…
Convergence of utility indifference prices to the superreplication price in a multiple-priors framework
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 …
Asymptotic indifference pricing in exponential L\'evy models
Financial markets based on L\'evy processes are typically incomplete and option prices depend on risk attitudes of individual agents. In this context, the notion of utility indifference price has gained popularity in the…
The pricing of contingent claims and optimal positions in asymptotically complete markets
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 …
Optimal Liquidation with High Risk Aversion and Small Linear Price Impact
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 re…
Position