Explicit Representations for Utility Indifference Prices

2021 ◽  
pp. 1-25
Author(s):  
Markus Hess
2019 ◽  
Vol 7 (3) ◽  
pp. 35
Author(s):  
Nelson Christopher Dzupire ◽  
Philip Ngare ◽  
Leo Odongo

This paper follows an incomplete market pricing approach to analyze the evaluation of weather derivatives and the viability of a weather derivatives market in terms of hedging. A utility indifference method is developed for the specification of indifference prices for the seller and buyer of a basket of weather derivatives written on rainfall and temperature. The agent’s risk preference is described by an exponential utility function and the prices are derived by dynamic programming principles and corresponding Hamilton Jacobi-Bellman equations from the stochastic optimal control problems. It is found the indifference measure is equal to the physical measure as there is no correlation between the capital market and weather. The fair price of the derivative should be greater than the seller’s indifference price and less than the buyer’s indifference price for market viability and no arbitrage opportunities.


Author(s):  
Jian Liu ◽  
Mengxian Tao ◽  
Chaoqun Ma ◽  
Fenghua Wen

We propose a pricing model for convertible bonds based on the utility-indifference method and get access to the empirical results by use of Information Technology. By using the stochastic control theory, the general expression of utility indifference price on convertible bonds is obtained under the CIR interest rate model. Furthermore, using the proposed theoretical model, we present an empirical pricing study of China's market, using three convertible bonds and more than 70 months of daily market prices. The parameters value is estimated by the maximum likelihood method, and the prices of convertible bonds are simulated by the Monte Carlo approach. The empirical results indicate that the theoretical prices are higher than the actual market prices 0.24–4.58%, and the utility indifference prices are better than the Black–Scholes (BS) prices.


Author(s):  
Giuseppe Cocchetti ◽  
Egidio Rizzi

AbstractThis analytical note shall provide a contribution to the understanding of general principles in the Mechanics of (symmetric circular) masonry arches. Within a mainstream of previous research work by the authors (and competent framing in the dedicated literature), devoted to investigate the classical structural optimization problem leading to the least-thickness condition under self-weight (“Couplet-Heyman problem”), and the relevant characteristics of the purely rotational five-hinge collapse mode, new and complementary information is here analytically derived. Peculiar extremal conditions are explicitly inspected, as those leading to the maximum intrinsic non-dimensional horizontal thrust and to the foremost wide angular inner-hinge position from the crown, both occurring for specific instances of over-complete (horseshoe) arches. The whole is obtained, and confronted, for three typical solution cases, i.e., Heyman, “CCR” and Milankovitch instances, all together, by full closed-form explicit representations, and elucidated by relevant illustrations.


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