2020/11/10 by Peter Bank, Bank, Peter, Yan Dolinsky +1
Economics, Econometrics and Finance · #91G10 #91G20 #Economic theories and models #FOS: Economics and business #FOS: Mathematics #Financial Risk and Volatility Modeling #Mathematical Finance (q-fin.MF) #Probability (math.PR) #Stochastic processes and financial applications
paper · pdf · doi:10.48550/arxiv.2011.05023
openalex publication_date 2020/11/10 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
We consider the Bachelier model with information delay where investment decisions can be based only on observations from H>0 time units before. Utility indifference prices are studied for vanilla options and we compute their non-trivial scaling limit for vanishing delay when risk aversion is scaled liked A/H for some constant A. Using techniques from [7], we develop discrete-time duality for this setting and show how the relaxed form of martingale property introduced by [9] results in the scaling limit taking the form of a volatility control problem with quadratic penalty.