Approximation solutions for indifference pricing under general utility functions

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Chen, An and Pelsser, Antoon and Vellekoop, Michel (2008) Approximation solutions for indifference pricing under general utility functions. In: 7th Winter school on Mathematical Finance, January 21-23, 2008, Lunteren, the Netherlands.

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Abstract:With the aid of Taylor-based approximations, this paper presents results for pricing insurance contracts by using indifference pricing under general utility functions. We discuss the connection between the resulting "theoretical" indifference prices and the pricing rule-of-thumb that practitioners use: Best Estimate plus a "Market Value Margin". Furthermore, we compare our approximations to known analytical results for exponential and power utility.
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Link to this item:http://purl.utwente.nl/publications/59735
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