Risk-indifference pricing of American-style contingent claims
Abstract
This paper studies the pricing of contingent claims of American style, using indifference pricing by fully dynamic convex risk measures. We provide a general definition of risk-indifference prices for buyers and sellers in continuous time, in a setting where buyer and seller have potentially different information, and show that these definitions are consistent with no-arbitrage principles. Specifying to stochastic volatility models, we characterize indifference prices via solutions of Backward Stochastic Differential Equations reflected at Backward Stochastic Differential Equations and show that this characterization provides a basis for the implementation of numerical methods using deep learning.
Fields of Study & Subjects
Insurance and Financial Risk Management
Credit Risk and Financial Regulations
Publication details
- Journal / source
- Probability Uncertainty and Quantitative Risk
- Publisher
- American Institute of Mathematical Sciences (AIMS)
- Volume
- 11
- Issue
- 1
- Pages
- 85–110
- Publication date
- 1 January 2026
- Language
- EN