A numerical study of the utility-indifference approach for pricing American options

被引：3
作者：
Yan, Dong [1 ]
Zhu, Song-Ping [1 ]
Lu, Xiaoping [1 ]
机构：
[1] Univ Wollongong, Sch Math & Appl Stat, Wollongong, NSW, Australia
来源：
COMPUTERS & MATHEMATICS WITH APPLICATIONS | 2020年 / 80卷 / 05期
关键词：
Option pricing; Utility-based approach; Constant volatility; Hamilton-Jacobi-Bellman equation; Finite differences; REPLICATION; MODEL;
D O I：
10.1016/j.camwa.2020.05.007
中图分类号：
O29 [应用数学];
学科分类号：
070104 ;
摘要：
Utility-indifference approach is a useful approach to be adopted for pricing financial derivatives in an incomplete market and is an ongoing hot research topic in quantitative finance. One interesting question associated with this approach is whether or not it renders to the same option prices, degenerately, when the market becomes infinitesimally close to a complete market. The answer for such a question has been provided for European-style options as there is a well-documented theoretical proof in Davis et al. (1993). However, a theoretical proof for the case of pricing American-style options is unavailable at this stage and the answer for this question must be at least numerically confirmed before it can be comfortably used to price American-style options in incomplete markets. The contribution of this paper is to provide such a numerical verification. (C) 2020 Elsevier Ltd. All rights reserved.
引用
收藏
页码：894 / 905
页数：12
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