Convergence of utility indifference prices to superreplication price

Laurence Carassus (1) , Miklos Rasonyi (2)

1 LPMA - Laboratoire de Probabilités et Modèles Aléatoires
2 MTA SZTAKI - Computer and Automation Research Institute [Budapest]

A discrete-time financial market model is considered with a sequence of investors whose preferences are described by concave strictly increasing functions defined on the positive axis. Under suitable conditions we show that, whenever their absolute risk-aversion tends to infinity, the respective utility indifference prices of a given bounded contingent claim converge to the superreplication price.

Keywords: derivative pricing; utility indifference price; superreplication; utility maximization

Domains: Probability [math.PR]

Laurence Carassus, Miklos Rasonyi. Convergence of utility indifference prices to superreplication price. 2005. ⟨hal-00004274⟩