TY - JOUR
T1 - An approximate approach to the exponential utility indifference valuation
AU - Arai, Takuji
N1 - Funding Information:
The author would like to express his gratitude to Martin Schweizer and Shigeo Kusuoka for their much valued advice. Financial support of the author has been partially granted by Grant-in-Aid for Young Scientists (B) No.16740062 from the Ministry of Education, Culture, Sports, Science and Technology of Japan.
PY - 2007/5
Y1 - 2007/5
N2 - We propose, in this paper, a new valuation method for contingent claims, which approximates to the exponential utility indifference valuation. In particular, we treat both ask and bid valuations. In the definition of the exponential utility indifference valuation, we require strong integrability for the underlying contingent claim. The new valuation in this paper succeeds in reducing it by using a kind of power functions instead of the exponential function. Furthermore, we shall investigate some basic properties and an asymptotic behavior of the new valuation.
AB - We propose, in this paper, a new valuation method for contingent claims, which approximates to the exponential utility indifference valuation. In particular, we treat both ask and bid valuations. In the definition of the exponential utility indifference valuation, we require strong integrability for the underlying contingent claim. The new valuation in this paper succeeds in reducing it by using a kind of power functions instead of the exponential function. Furthermore, we shall investigate some basic properties and an asymptotic behavior of the new valuation.
KW - Incomplete markets
KW - Indifference value
KW - Reverse hölder inequality
KW - p-optimal martingale measure
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U2 - 10.1142/S0219024907004299
DO - 10.1142/S0219024907004299
M3 - Article
AN - SCOPUS:34247390503
SN - 0219-0249
VL - 10
SP - 475
EP - 503
JO - International Journal of Theoretical and Applied Finance
JF - International Journal of Theoretical and Applied Finance
IS - 3
ER -