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Pseudo linear pricing rule for utility indifference valuation

Vicky Henderson () and Gechun Liang ()

Finance and Stochastics, 2014, vol. 18, issue 3, 593-615

Abstract: This paper considers exponential utility indifference pricing for a multidimensional non-traded assets model, and provides two linear approximations for the utility indifference price. The key tool is a probabilistic representation for the utility indifference price by the solution of a functional differential equation, which is termed pseudo linear pricing rule. We also provide an alternative derivation of the quadratic BSDE representation for the utility indifference price. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: Utility indifference pricing; Quadratic BSDE; Functional differential equation; FBSDE; 91G40; 91G80; 60H30; G11; G13 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/s00780-014-0235-x

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