Indifference Pricing in a Basis Risk Model with Stochastic Volatility

Thesis

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 o...

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Authors: Lam, K

• Publisher: oxford university;mathematical institute
• Publication date: 2011-06-24