A Note on Utility Indifference Pricing with Delayed Information
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Abstract: We consider the Bachelier model with information delay where investment decisions can be based only on observations from time units before. Utility indifference prices are studied for vanilla options and we compute their non-trivial scaling limit for vanishing delay when risk aversion is scaled liked for some constant . Using techniques from [7], we develop discrete-time duality for this setting and show how the relaxed form of martingale property introduced by [9] results in the scaling limit taking the form of a volatility control problem with quadratic penalty.
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