Derivative pricing based on local utility maximization
Jan Kallsen;
- Subject: Option pricing, Incomplete markets, Local utility, Neutral derivative price, Sensitivity process, Local sensitivity
- jel: jel:G13 | jel:D52 | jel:D58
This paper discusses a new approach to contingent claim valuation in general incomplete market models. We determine the neutral derivative price which occurs if investors maximize their local utility and if derivative demand and supply are balanced. We also introduce th... View more
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