Stability of Utility Maximization in Nonequivalent Markets
Event details
Date | 01.10.2015 |
Hour | 12:00 › 13:00 |
Speaker | Kim WESTON (PhD student at Carnegie Mellon University) |
Location | |
Category | Conferences - Seminars |
Consider a contingent claim whose underlying is not replicable yet is highly correlated with a traded asset. As the correlation between the underlying and traded asset increases to 1, do the claim's indifference prices converge to the arbitrage-free price? In this talk, I will first present a simple counterexample in a Brownian setting with power utility where the indifference prices do not converge. The counterexample's degeneracies are alleviated for utility functions on the real line, and a positive convergence result will be presented in this case.
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