Indifference Pricing in a Basis Risk Model with Stochastic Volatility
The aim of this dissertation is to study exponential indifference pricing in a basis risk model of one tradable asset and one correlated non-tradable asset in which a claim on the non-tradable asset is hedged using the tradable asset. We extend this to incorporate stochastic volatilities for both as...
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| Format: | Thesis |
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oxford university;mathematical institute
2011
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| _version_ | 1797112519982055424 |
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| author | Lam, K |
| author_facet | Lam, K |
| author_sort | Lam, K |
| collection | OXFORD |
| description | The aim of this dissertation is to study exponential indifference pricing in a basis risk model of one tradable asset and one correlated non-tradable asset in which a claim on the non-tradable asset is hedged using the tradable asset. We extend this to incorporate stochastic volatilities for both assets, driven by a common stochastic factor, and look for the corresponding indifference price characterisation under such a model. We would also look at the optimal portfolio in hedging the claim on the non-tradable asset, the residual risk process and the payoff decomposition of the claim involving the indifference price process and a local martingale. Towards the end of the discussion, we would outline a procedure which one could use to obtain numerical results for the indifference price under this model. |
| first_indexed | 2024-03-07T08:25:15Z |
| format | Thesis |
| id | oxford-uuid:cb08dbbb-9d1d-4e72-8f8b-80047092c93f |
| institution | University of Oxford |
| last_indexed | 2024-03-07T08:25:15Z |
| publishDate | 2011 |
| publisher | oxford university;mathematical institute |
| record_format | dspace |
| spelling | oxford-uuid:cb08dbbb-9d1d-4e72-8f8b-80047092c93f2024-02-12T11:34:57ZIndifference Pricing in a Basis Risk Model with Stochastic Volatility Thesishttp://purl.org/coar/resource_type/c_db06uuid:cb08dbbb-9d1d-4e72-8f8b-80047092c93fMathematical Institute - ePrintsoxford university;mathematical institute2011Lam, KThe aim of this dissertation is to study exponential indifference pricing in a basis risk model of one tradable asset and one correlated non-tradable asset in which a claim on the non-tradable asset is hedged using the tradable asset. We extend this to incorporate stochastic volatilities for both assets, driven by a common stochastic factor, and look for the corresponding indifference price characterisation under such a model. We would also look at the optimal portfolio in hedging the claim on the non-tradable asset, the residual risk process and the payoff decomposition of the claim involving the indifference price process and a local martingale. Towards the end of the discussion, we would outline a procedure which one could use to obtain numerical results for the indifference price under this model. |
| spellingShingle | Lam, K Indifference Pricing in a Basis Risk Model with Stochastic Volatility |
| title | Indifference Pricing in a Basis Risk Model with Stochastic Volatility
|
| title_full | Indifference Pricing in a Basis Risk Model with Stochastic Volatility
|
| title_fullStr | Indifference Pricing in a Basis Risk Model with Stochastic Volatility
|
| title_full_unstemmed | Indifference Pricing in a Basis Risk Model with Stochastic Volatility
|
| title_short | Indifference Pricing in a Basis Risk Model with Stochastic Volatility
|
| title_sort | indifference pricing in a basis risk model with stochastic volatility |
| work_keys_str_mv | AT lamk indifferencepricinginabasisriskmodelwithstochasticvolatility |