The indifference pricing of the exponential utility function in the discrete time model
Weng Xuan-tao
Abstract
Weng Xuan-tao
Abstract
It is shown that the indifference pricing is arbitrage-free pricing by the martingale approach.The key problems about the exponential utility function indifference pricing are considered in the incomplete market,and the indifference pricing is expressed as the conditional variation expectation of contingent claim under the specific martingale measure at the terminal date.
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It is shown that the indifference pricing is arbitrage-free pricing by the martingale approach.The key problems about the exponential utility function indifference pricing are considered in the incomplete market,and the indifference pricing is expressed as the conditional variation expectation of contingent claim under the specific martingale measure at the terminal date.
Key concepts: Martingale pricing, Martingale (probability theory), Mathematical economics, Economics, Exponential function, Incomplete markets, Discrete time and continuous time, Arbitrage