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Forward Exponential Performances: Pricing and Optimal Risk Sharing

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  • Michail Anthropelos

Abstract

In a Markovian stochastic volatility model, we consider ?nancial agents whose investment criteria are modelled by forward exponential performance processes. The problem of contingent claim indi?fference valuation is ?first addressed and a number of properties are proved and discussed. Special attention is given to the comparison between the forward exponential and the backward exponential utility indiff?erence valuation. In addition, we construct the problem of optimal risk sharing in this forward setting and solve it when the agents' forward performance criteria are exponential.

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File URL: http://arxiv.org/pdf/1109.3908
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Paper provided by arXiv.org in its series Papers with number 1109.3908.

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Date of creation: Sep 2011
Date of revision: Mar 2013
Handle: RePEc:arx:papers:1109.3908

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  1. Henderson, Vicky & Hobson, David, 2007. "Horizon-unbiased utility functions," Stochastic Processes and their Applications, Elsevier, vol. 117(11), pages 1621-1641, November.
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  9. Michail Anthropelos & Gordan Zitkovic, 2008. "On Agents' Agreement and Partial-Equilibrium Pricing in Incomplete Markets," Papers 0803.2198, arXiv.org.
  10. Jouini, Elyès & Schachermayer, Walter & Touzi, Nizar, 2008. "Optimal Risk Sharing for Law Invariant Monetary Utility Functions," Economics Papers from University Paris Dauphine 123456789/361, Paris Dauphine University.
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  12. R. C. Merton, 1970. "Optimum Consumption and Portfolio Rules in a Continuous-time Model," Working papers 58, Massachusetts Institute of Technology (MIT), Department of Economics.
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Cited by:
  1. Tahir Choulli & Junfeng Ma, 2013. "Explicit Description of HARA Forward Utilities and Their Optimal Portfolios," Papers 1307.0785, arXiv.org.

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