Utility Indifference Pricing with High Risk Aversion and Small Linear Price Impact

2021/10/31 by Yan Dolinsky, Dolinsky, Yan, Shir Moshe +1
Economics, Econometrics and Finance · #60H30 #91G10 #91G20 #FOS: Economics and business #Financial Markets and Investment Strategies #Mathematical Finance (q-fin.MF) #Monetary Policy and Economic Impact #Portfolio Management (q-fin.PM) #Stochastic processes and financial applications

paper · pdf · doi:10.48550/arxiv.2111.00451

openalex publication_date 2021/10/31 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28

Abstract

We consider the Bachelier model with linear price impact. Exponential utility indifference prices are studied for vanilla European options and we compute their non-trivial scaling limit for a vanishing price impact which is inversely proportional to the risk aversion. Moreover, we find explicitly a family of portfolios which are asymptotically optimal.

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