Optimal investment and contingent claim valuation in illiquid markets (Q2255004)

The article studies reserving and indifference pricing (meaning that the seller of a claim charges a price that allows him to sell the claim without increasing the risk of his existing financial position) in illiquid markets where wealth cannot be transferred quite freely, neither between assets nor through time, due to nonlinear trading costs and portfolio constraints. Some results state arbitrage bounds for reservation values and general swap contracts where both claims and premiums may have multiple payout dates. Existence of solutions and the lower semicontinuity of the optimal value function are established as well.