Short Communication: Utility Indifference Pricing with High Risk Aversion and Small Linear Price Impact

Yan Dolinsky, Shir Moshe

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

We consider the Bachelier model with linear price impact. Exponential utility indifference prices are studied for vanilla European options, and we compute their nontrivial 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.

Original languageAmerican English
Pages (from-to)SC12-SC25
JournalSIAM Journal on Financial Mathematics
Volume13
Issue number1
DOIs
StatePublished - 2022

Bibliographical note

Funding Information:
\ast Received by the editors November 1, 2021; accepted for publication (in revised form) January 5, 2022; published electronically March 7, 2022. https://doi.org/10.1137/21M1456431 Funding: This work was supported by GIF grant 1489-304.6/2019 and by ISF grant 230/21. \dagger Department of Statistics, Hebrew University of Jerusalem, Jerusalem, 91905, Israel (yan.dolinsky@mail.huji.ac.il, shir.tapiro@mail.huji.ac.il).

Publisher Copyright:
© 2022 Society for Industrial and Applied Mathematics Publications. All rights reserved.

Keywords

  • asymptotic analysis
  • linear price impact
  • utility indifference pricing

Fingerprint

Dive into the research topics of 'Short Communication: Utility Indifference Pricing with High Risk Aversion and Small Linear Price Impact'. Together they form a unique fingerprint.

Cite this