Option pricing by large risk aversion utility¶under transaction costs

2001 ◽  
Vol 24 (2) ◽  
pp. 127-136 ◽  
Author(s):  
B. Bouchard ◽  
Yu. M. Kabanov ◽  
N. Touzi
Keyword(s):  
Risk Aversion ◽  
Option Pricing ◽  
Transaction Costs

scholarly journals The role of transaction costs and risk aversion when selecting between one and two regimes for portfolio models

2018 ◽  
Vol 26 (6) ◽  
pp. 516-521 ◽  
Author(s):  
Emmanouil Platanakis ◽  
Athanasios Sakkas ◽  
Charles Sutcliffe
Keyword(s):  
Risk Aversion ◽  
Transaction Costs

Subjective value of the guarantees embedded in public cash-balance pension plans

2017 ◽  
Vol 17 (2) ◽  
pp. 231-250
Author(s):  
CHUN-HUA TANG
Keyword(s):  
Risk Aversion ◽  
Option Pricing ◽  
Pension Plans ◽  
Numerical Results ◽  
Cash Balance ◽  
Certainty Equivalence ◽  
Subjective Value ◽  
Public Sectors ◽  
The Cost ◽  
Cash Balance Pension Plans

AbstractSome public sectors provide cash-balance pension plans with guaranteed interest credits. We use the certainty-equivalence framework to derive the subjective value of the guarantee perceived by the participant. Numerical results show that in many scenarios the subjective value is lower than the cost of the guarantee derived by option pricing approaches, implying that public sectors potentially spend too much in providing the guarantee. However, the subjective value could be higher than the cost of the guarantee under some scenarios, depending on the participant's level of risk aversion, the feasibility of diversification, and so forth.

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