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Overview of utility-based valuation

  • David German
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    We review the utility-based valuation method for pricing derivative securities in incomplete markets. In particular, we review the practical approach to the utility-based pricing by the means of computing the first order expansion of marginal utility-based prices with respect to a small number of random endowments.

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    File URL: http://arxiv.org/pdf/1003.5712
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    Paper provided by arXiv.org in its series Papers with number 1003.5712.

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    Date of creation: Mar 2010
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    Handle: RePEc:arx:papers:1003.5712
    Contact details of provider: Web page: http://arxiv.org/

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    1. Julien Hugonnier & Dmitry Kramkov, 2004. "Optimal investment with random endowments in incomplete markets," Papers math/0405293, arXiv.org.
    2. Marek Musiela & Thaleia Zariphopoulou, 2004. "An example of indifference prices under exponential preferences," Finance and Stochastics, Springer, vol. 8(2), pages 229-239, 05.
    3. Dmitry Kramkov & Mihai S\^{{\i}}rbu, 2006. "On the two-times differentiability of the value functions in the problem of optimal investment in incomplete markets," Papers math/0610224, arXiv.org.
    4. Vicky Henderson, 2002. "Valuation Of Claims On Nontraded Assets Using Utility Maximization," Mathematical Finance, Wiley Blackwell, vol. 12(4), pages 351-373.
    5. Julien Hugonnier & Dmitry Kramkov & Walter Schachermayer, 2005. "On Utility-Based Pricing Of Contingent Claims In Incomplete Markets," Mathematical Finance, Wiley Blackwell, vol. 15(2), pages 203-212.
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