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arXiv · 1401.3261

General indifference pricing with small transaction costs

Dylan Possamaï·Guillaume Royer
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Abstract

We study the utility indifference price of a European option in the context of small transaction costs. Considering the general setup allowing consumption and a general utility function at final time T, we obtain an asymptotic expansion of the utility indifference price as a function of the asymptotic expansions of the utility maximization problems with and without the European contingent claim. We use the tools developed in [54] and [48] based on homogenization and viscosity solutions to characterize these expansions. Finally we study more precisely the example of exponential utilities, in particular recovering under weaker assumptions the results of [6].

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Dylan Possamaï, Guillaume Royer. 2014-01-14. General indifference pricing with small transaction costs. https://arxiv.org/abs/1401.3261

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