Annuncio di Seminario Luciano Campi, London School of Economics, London

Giovedi' 3 Luglio, presso il Dipartimento di Informatica, Università di Verona Strada le Grazie, 15 - Sala Verde ore 15:00 (14:45 rinfresco, 15:00 inizio seminario)

Title: Utility indifference valuation for non-smooth payoffs with an application to power derivatives

Abstract: We consider the problem of exponential utility indifference valuation under the simplified framework where traded and nontraded assets are uncorrelated but where the claim to be priced possibly depends on both. Traded asset prices follow a multivariate Black and Scholes model, while nontraded asset prices evolve as generalized Ornstein-Uhlenbeck processes. We provide a BSDE characterization of the utility indifference price (UIP) for a large class of non-smooth, possibly unbounded, payoffs depending simultaneously on both classes of assets. Focusing then on European claims and using the Gaussian structure of the model allows us to employ some BSDE techniques (in particular, a Malliavin-type representation theorem due to Ma (2002)) to prove the regularity of Z and to characterize the UIP for possibly discontinuous European payoffs as a viscosity solution of a suitable PDE with continuous space derivatives. The optimal hedging strategy is also identified essentially as the delta hedging strategy corresponding to the UIP. Since there are no closed-form formulas in general, we also obtain asymptotic expansions for prices and hedging strategies when the risk aversion parameter is small. Finally, our results are applied to pricing and hedging power derivatives in various structural models for energy markets.

Contact Person: Luca Di Persio __ Luca Di Persio - PhD assistant professor of Probability and Mathematical Finance

Dept. Informatics University of Verona strada le Grazie 15 - 37134 Verona - Italy Tel : +39 045 802 7968

Dept. Math University of Trento V. Sommarive, 14 - 38123 Povo - Italy Tel : +39 0461 281686