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Dynamic risk indifference pricing

5 October 2017 at 12:30 PM - 1:30 PM

Room 207, Campus on Viale Romania, 32

Speaker: Giulia Di Nunno, University of Oslo

We deal with dynamic pricing from the seller's perspective in an incomplete market and we focus on risk indifference pricing. We propose a fully-dynamic risk-indifference criteria, in which a whole family of risk measures is considered. This is based on the concept of fully-dynamic risk measures which extends the one of dynamic risk measures by adding the actual possibility of changing the risk perspectives over time. 

Our framework fits well the study of both short and long term investments.In the dynamic framework we analyse whether the risk indifference criterion actually provides a proper convex price system.  Furthermore, we consider the relationship of the fully-dynamic risk-indifference price with no-good-deal bounds. Recall that no-good-deal pricing guarantees that not only arbitrage opportunities are excluded, but also all deals that are “too good to be true”.We shall provide necessary and sufficient conditions on the fully-dynamic risk measure so that the corresponding risk-indifference prices satisfy the no-good-deal bounds. As it turns out, no-good-deal bounds also provide a method to select the risk measures that provide a proper fully-dynamic risk-indifference price system. The presentation is based on joint works with Jocelyne Bion-Nadal.