A probabilistic iterative algorithm is constructed for indifference prices of claims in a multiperiod incomplete model. At each time step, a nonlinear pricing functional is applied that isolates and prices separately the two types of risk. It is represented solely in terms of risk aversion and...

The aim herein is to analyze utility-based prices and hedging strategies. The analysis is based on an explicitly solved example of a European claim written on a nontraded asset, in a model where risk preferences are exponential, and the traded and nontraded asset are diffusion processes with,...

A class of term structure models with volatility of lognormal type is analyzed in the general HJM framework. The corresponding market forward rates do not explode, and are positive and mean reverting. Pricing of caps and floors is consistent with the Black formulas used in the market. Swaptions...

We derive a unified model which gives closed form solutions for caps and floors written on interest rates as well as puts and calls written on zero-coupon bonds. The crucial assumption is that forward rates with a compounding period that matches the contract, which we want to price, is...

We derive a unified model which gives closed form solutions for caps and floors written on interest rates as well as puts and calls written on zero-coupon bonds. The crucial assumption is that forward rates with a compounding period that matches the contract, which we want to price, is log...

We derive a unified model which gives closed form solutions for caps and floors written on interest rates as well as puts and calls written on zero-coupon bonds. The crucial assumption is that forward rates with a compounding period that matches the contract, which we want to price, is log-...