Utility Indifference Pricing with High Risk Aversion and Small Linear Price Impact

Yan Dolinsky and Shir Moshe

Papers from arXiv.org

Abstract: We consider the Bachelier model with linear price impact. Exponential utility indifference prices are studied for vanilla European options and we compute their non-trivial scaling limit for a vanishing price impact which is inversely proportional to the risk aversion. Moreover, we find explicitly a family of portfolios which are asymptotically optimal.

Date: 2021-10, Revised 2022-01
New Economics Papers: this item is included in nep-upt
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Citations: View citations in EconPapers (2)

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