اشترك بالحزمة الذهبية واحصل على وصول غير محدود شمرا أكاديميا
تسجيل مستخدم جديدIndifference Pricing and Hedging in a Multiple-Priors Model with Trading Constraints
148
0
0.0
(
0
)
اسأل ChatGPT حول البحث
ﻻ يوجد ملخص باللغة العربية
This paper considers utility indifference valuation of derivatives under model uncertainty and trading constraints, where the utility is formulated as an additive stochastic differential utility of both intertemporal consumption and terminal wealth, and the uncertain prospects are ranked according to a multiple-priors model of Chen and Epstein (2002). The price is determined by two optimal stochastic control problems (mixed with optimal stopping time in the case of American option) of forward-backward stochastic differential equations. By means of backward stochastic differential equation and partial differential equation methods, we show that both bid and ask prices are closely related to the Black-Scholes risk-neutral price with modified dividend rates. The two prices will actually coincide with each other if there is no trading constraint or the model uncertainty disappears. Finally, two applications to European option and American option are discussed.
قيم البحث
اقرأ أيضاً
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 driven by fi
nitely many stochastic factors. The buyer of such contracts is allowed to trade in the forward market in order to hedge the risk of his position. We fully characterize the buyers utility indifference price of a given product in terms of continuous viscosity solutions of suitable nonlinear PDEs. This gives a way to identify reasonable candidates for the optimal exercise strategy for the structured product as well as for the corresponding hedging strategy. Moreover, in a model with two correlated assets, one traded and one nontraded, we obtain a representation of the price as the value function of an auxiliary simpler optimization problem under a risk neutral probability, that can be viewed as a perturbation of the minimal entropy martingale measure. Finally, numerical results are provided.
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 concave random functions defin
ed on the positive axis. We prove that under suitable conditions the multiple-priors utility indifference prices of a contingent claim converge to its multiple-priors superreplication price. We also revisit the notion of certainty equivalent for random utility functions and establish its relation with the absolute risk aversion.
We consider an incomplete multi-asset binomial market model. We prove that for a wide class of contingent claims the extremal multi-step martingale measure is a power of the corresponding single-step extremal martingale measure. This allows for close
d form formulas for the bounds of a no-arbitrage contingent claim price interval. We construct a feasible algorithm for computing those boundaries as well as for the corresponding hedging strategies. Our results apply, for example, to European basket call and put options and Asian arithmetic average options.
With model uncertainty characterized by a convex, possibly non-dominated set of probability measures, the agent minimizes the cost of hedging a path dependent contingent claim with given expected success ratio, in a discrete-time, semi-static market
of stocks and options. Based on duality results which link quantile hedging to a randomized composite hypothesis test, an arbitrage-free discretization of the market is proposed as an approximation. The discretized market has a dominating measure, which guarantees the existence of the optimal hedging strategy and helps numerical calculation of the quantile hedging price. As the discretization becomes finer, the approximate quantile hedging price converges and the hedging strategy is asymptotically optimal in the original market.
The VIX call options for the Barndorff-Nielsen and Shephard models will be discussed. Derivatives written on the VIX, which is the most popular volatility measurement, have been traded actively very much. In this paper, we give representations of the
VIX call option price for the Barndorff-Nielsen and Shephard models: non-Gaussian Ornstein--Uhlenbeck type stochastic volatility models. Moreover, we provide representations of the locally risk-minimizing strategy constructed by a combination of the underlying riskless and risky assets. Remark that the representations obtained in this paper are efficient to develop a numerical method using the fast Fourier transform. Thus, numerical experiments will be implemented in the last section of this paper.
سجل دخول لتتمكن من نشر تعليقات
التعليقات
جاري جلب التعليقات
سجل دخول لتتمكن من متابعة معايير البحث التي قمت باختيارها
