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

Yan Dolinsky, Shir Moshe

Research output: Contribution to journalArticlepeer-review

2 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

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

Keywords

  • asymptotic analysis
  • linear price impact
  • utility indifference pricing

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