Exponential utility optimization, indifference pricing and hedging for a payment process

@article{ŁukaszDelong2012,
abstract = {We deal with pricing and hedging for a payment process. We investigate a Black-Scholes financial market with stochastic coefficients and a stream of liabilities with claims occurring at random times, continuously over the duration of the contract and at the terminal time. The random times of the claims are generated by a random measure with a stochastic intensity of jumps. The claims are written on the asset traded in the financial market and on the non-tradeable source of risk driven by the random measure. Our framework allows us to consider very general streams of liabilities which may arise in financial and insurance applications. We solve the exponential utility optimization problem for our payment process and we derive the indifference price and hedging strategy. We apply backward stochastic differential equations.},
author = {Łukasz Delong},
journal = {Applicationes Mathematicae},
keywords = {Black-Scholes model; random measure; backward stochastic differential equation; exponential utility; insurance and financial claims},
language = {eng},
number = {2},
pages = {211-229},
title = {Exponential utility optimization, indifference pricing and hedging for a payment process},
url = {http://eudml.org/doc/280058},
volume = {39},
year = {2012},
}

TY - JOUR
AU - Łukasz Delong
TI - Exponential utility optimization, indifference pricing and hedging for a payment process
JO - Applicationes Mathematicae
PY - 2012
VL - 39
IS - 2
SP - 211
EP - 229
AB - We deal with pricing and hedging for a payment process. We investigate a Black-Scholes financial market with stochastic coefficients and a stream of liabilities with claims occurring at random times, continuously over the duration of the contract and at the terminal time. The random times of the claims are generated by a random measure with a stochastic intensity of jumps. The claims are written on the asset traded in the financial market and on the non-tradeable source of risk driven by the random measure. Our framework allows us to consider very general streams of liabilities which may arise in financial and insurance applications. We solve the exponential utility optimization problem for our payment process and we derive the indifference price and hedging strategy. We apply backward stochastic differential equations.
LA - eng
KW - Black-Scholes model; random measure; backward stochastic differential equation; exponential utility; insurance and financial claims
UR - http://eudml.org/doc/280058
ER -