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March 8, 2017 | 1:00 p.m. - 2:00 p.m.
Category: Seminar
Location: Faculty/Administration #1146 | Map
656 W. Kirby
Detroit, MI 48202
Cost: Free

Speaker: Hussein Nasralah, Wayne State University

Title: On indifference pricing of contingent claims

Abstract: Asset pricing is an active research area in math finance concerned with determining the appropriate price of, say, a derivative security such as a contingent claim, where $T$ is the maturity date.

A fundamental assumption in mathematical models of financial markets is that of no arbitrage (i.e., no opportunity for a "free lunch").  In a complete market, in which every $T$-claim can be replicated by a portfolio of stocks and bonds, the no arbitrage assumption necessitates a unique price for the claim.  On the other hand, in an incomplete market, not every $T$-claim can be perfectly hedged, and the no arbitrage assumption is not enough to specify a unique price.  In this talk, we will discuss results stemming from one candidate for the price of an asset in the above incomplete setup: the utility indifference price.  The discussion will take place in a binomial model so that the results can be understood intuitively.

For more information about this event, please contact Department of Mathematics at 3135772479 or eb1208@wayne.edu.