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Mathematical Finance and Probability Seminars

Stability of Utility Maximization in Nonequivalent Markets

Location:  Hill 705
Date & time: Friday, 29 January 2016 at 12:00PM - 12:11PM

Kim Weston, Carnegie Mellon University: Consider a derivative security whose underlying is not replicable yet is highly correlated with a traded asset. As the correlation between the underlying and traded asset increases to 1, do the claim's indifference prices converge to the arbitrage-free price? In this talk, I will first present a counterexample in a Brownian setting with power utility investor where the indifference prices do not converge. The counterexample's degeneracies are alleviated for utility functions on the real line, and a positive convergence result will be presented in this case.

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Department of Mathematics

Department of Mathematics
Rutgers University
Hill Center - Busch Campus
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