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A multidimensional exponential utility indifference pricing model with applications to counterparty risk
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Henderson, Vicky and Liang, Gechun (2016) A multidimensional exponential utility indifference pricing model with applications to counterparty risk. SIAM Journal on Control and Optimization, 54 (2). pp. 690-717. doi:10.1137/15M1040293 ISSN 0363-0129.
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Official URL: http://dx.doi.org/10.1137/15M1040293
Abstract
This paper considers exponential utility indifference pricing for a multidimensional nontraded assets model subject to inter-temporal default risk, and provides a semigroup approximation for the utility indifference price. The key tool is the splitting method, whose convergence is proved based on the Barles-Souganidis monotone scheme, and the convergence rate is derived based on Krylov’s shaking the coefficients technique. We apply our methodology to study the counterparty risk of derivatives in incomplete markets.
Item Type: | Journal Article | ||||||||
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Alternative Title: | |||||||||
Divisions: | Faculty of Science, Engineering and Medicine > Science > Statistics | ||||||||
Journal or Publication Title: | SIAM Journal on Control and Optimization | ||||||||
Publisher: | Society for Industrial and Applied Mathematics | ||||||||
ISSN: | 0363-0129 | ||||||||
Official Date: | 24 March 2016 | ||||||||
Dates: |
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Volume: | 54 | ||||||||
Number: | 2 | ||||||||
Page Range: | pp. 690-717 | ||||||||
DOI: | 10.1137/15M1040293 | ||||||||
Status: | Peer Reviewed | ||||||||
Publication Status: | Published | ||||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||||
Date of first compliant deposit: | 13 January 2016 | ||||||||
Adapted As: |
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