A Multidimensional Exponential Utility Indifference Pricing Model with Applications to Counterparty Risk
AbstractThis paper considers exponential utility indifference pricing for a multidimensional non-traded 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. We apply our methodology to study the counterparty risk of derivatives in incomplete markets.
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Date of creation: Nov 2011
Date of revision: May 2014
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