Exponential utility optimization, indifference pricing and hedging for a payment process

• Autorzy: Łukasz Delong
• Języki publikacji: EN

Abstrakty

EN

We deal with pricing and hedging for a payment process. We investigate a Black-Scholes financial market with stochastic coefficients and a stream of liabilities with claims occurring at random times, continuously over the duration of the contract and at the terminal time. The random times of the claims are generated by a random measure with a stochastic intensity of jumps. The claims are written on the asset traded in the financial market and on the non-tradeable source of risk driven by the random measure. Our framework allows us to consider very general streams of liabilities which may arise in financial and insurance applications. We solve the exponential utility optimization problem for our payment process and we derive the indifference price and hedging strategy. We apply backward stochastic differential equations.

Kategorie tematyczne

• 93E20: Optimal stochastic control
• 91B16: Utility theory
• 91B30: Risk theory, insurance

• Wydawca: Institute of Mathematics Polish Academy of Sciences
• Czasopismo: Applicationes Mathematicae
• Rocznik: 2012
• Tom: 39
• Numer: 2
• Strony: 211-229

Daty

wydano

2012

Twórcy

autor

Łukasz Delong

• Institute of Econometrics, Division of Probabilistic Methods, Warsaw School of Economics, Al. Niepodległości 162, 02-554 Warszawa, Poland

Identyfikatory

DOI

10.4064/am39-2-7