Convergence of Utility Indifference Prices to the Superreplication Price

Laurence Carassus () and Miklós Rásonyi ()

Mathematical Methods of Operations Research, 2006, vol. 64, issue 1, 145-154

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. Copyright Springer-Verlag 2006

Keywords: Utility indifference price; Superreplication price; Convergence; Utility maximization; Risk aversion (search for similar items in EconPapers)
Date: 2006
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DOI: 10.1007/s00186-006-0074-4

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