Comparison of utility indifference pricing and mean-variance approach under a normal mixture distribution with time-varying volatility

Jiro Hodoshima and Toshiyuki Yamawake

Finance Research Letters, 2019, vol. 28, issue C, 74-81

Abstract: We evaluate a utility indifference price with an exponential utility function, which we call a risk-sensitive value measure, under a normal mixture distribution with time-varying volatility. We compare the risk-sensitive value measure and mean-variance approach and provide an empirical application.

Keywords: Value measure; Utility indifference pricing; Normal mixture; GARCH (search for similar items in EconPapers)
JEL-codes: C13 C46 C58 G11 G32 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:28:y:2019:i:c:p:74-81

DOI: 10.1016/j.frl.2018.04.006

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