A note on utility-based pricing in models with transaction costs

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Title: A note on utility-based pricing in models with transaction costs
Author(s): Davis, MHA
Yoshikawa, D
Item Type: Journal Article
Abstract: This paper considers the utility-based and indifference pricing in a market with transaction costs. The utility maximization problem, including contingent claims in the market with transaction costs, has been widely researched. In this paper, closely following the results of Bouchard (Financ Stoch 6:495–516, 2002), we consider the market equilibrium of contingent claims. This is done by specifying the utility function as exponential utility and, thus, determining equilibrium in the market with transaction costs. Unlike Davis and Yoshikawa (Math Finan Econ, 2015), we use the strong assumption to deduce the equilibrium at which trade does not occur (zero trade equilibrium). It implicitly shows that transaction costs may generate a non-zero trade equilibrium under a weaker assumption.
Publication Date: 17-Feb-2015
Date of Acceptance: 12-Feb-2015
URI: http://hdl.handle.net/10044/1/42516
DOI: https://dx.doi.org/10.1007/s11579-015-0143-7
ISSN: 1862-9679
Publisher: Springer Verlag (Germany)
Start Page: 231
End Page: 245
Journal / Book Title: Mathematics and Financial Economics
Volume: 9
Issue: 3
Copyright Statement: © 2015 Springer-Verlag Berlin Heidelberg. The final publication is available at Springer via http://dx.doi.org/10.1007/s11579-015-0143-7
Keywords: Social Sciences
Science & Technology
Physical Sciences
Business, Finance
Economics
Mathematics, Interdisciplinary Applications
Social Sciences, Mathematical Methods
Business & Economics
Mathematics
Mathematical Methods In Social Sciences
Transaction costs
Utility-based price
Indifference pricing
Exponential utility
Utility-based curve
Partial equilibrium
MAXIMIZATION
MARKETS
TIME
01 Mathematical Sciences
14 Economics
Publication Status: Published
Appears in Collections:Financial Mathematics
Mathematics
Faculty of Natural Sciences



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