Utility-based indifference pricing in regime-switching models

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dc.contributor.authorElliott, Roberteng
dc.contributor.authorSiu, Tak Kueneng
dc.date.accessioned2012-06-28T17:12:54Z
dc.date.available2012-06-28T17:12:54Z
dc.date.issued2011
dc.descriptionArticle deposited according to the policy found on the Elsevier website, , http://www.elsevier.com/wps/find/authorsview.authors/postingpolicy, June 28, 2012.eng
dc.description.abstractIn this paper, we study utility-based indifference pricing and hedging of a contingent claim in a continuous-time, Markov, regime-switching model. The market in this model is incomplete, so there is more than one price kernel. We specify the parametric form of price kernels so that both market risk and economic risk are taken into account. The pricing and hedging problem is formulated as a stochastic optimal control problem and is discussed using the dynamic programming approach. A verification theorem for the Hamilton–Jacobi–Bellman (HJB) solution to the problem is given. An issuer’s price kernel is obtained from a solution of a system of linear programming problems and an optimal hedged portfolio is determined.eng
dc.description.refereedYeseng
dc.identifier.citationR.J. Elliott and T.K. Siu, „Utility-Based Indifference Pricing in Regime Switching Models‟, Nonlinear Analysis Series A: Theory, Methods & Applications, 74 (2011), 6302-6313eng
dc.identifier.doihttp://dx.doi.org/10.11575/PRISM/34094
dc.identifier.issn0362-546X
dc.identifier.urihttp://hdl.handle.net/1880/49074
dc.language.isoengeng
dc.publisherElseviereng
dc.publisher.corporateUniversity of Calgaryeng
dc.publisher.facultyHaskayne School of Businesseng
dc.publisher.hasversionPost-print
dc.publisher.urlhttp://www.journals.elsevier.com/nonlinear-analysis-theory-methods-and-applications/eng
dc.subjectContingent claim valuationeng
dc.subjectHedgingeng
dc.subject.otherRegime-switching riskeng
dc.subject.otherUtility indifferenceeng
dc.subject.otherProduct price kerneleng
dc.subject.otherDynamic programmingeng
dc.subject.otherMarkov regime-switching Hamilton–Jacobi–Bellman (HJB) equationseng
dc.subject.otherExponential utilityeng
dc.subject.otherLinear programmingeng
dc.titleUtility-based indifference pricing in regime-switching modelseng
dc.typejournal articleeng
thesis.degree.disciplineFinanceeng
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