Convergence of Utility Indifference Prices to the Superreplication Price |
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| Authors: | Laurence Carassus Miklós Rásonyi |
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| Affiliation: | (1) Laboratoire de Probabilités et Modèles Aléatoires, Université Paris 7 Denis Diderot, 16 rue Clisson, 75013 Paris, France;(2) Computer and Automation Institute of the Hungarian Academy of Sciences, 1518 Budapest, P. O. Box 63, Hungary |
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| Abstract: | A discrete-time financial market model is considered with a sequence of investors whose preferences are described by concave strictly increasing functions defined on the positive axis. Under suitable conditions, we show that the utility indifference prices of a bounded contingent claim converge to its superreplication price when the investors’ absolute risk-aversion tends to infinity. |
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| Keywords: | Utility indifference price Superreplication price Convergence Utility maximization Risk aversion |
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