Instruct: Identify the main and secondary category of Arxiv papers based on the titles and abstracts
Query: Indifference pricing for Contingent Claims: Large Deviations Effects   We study utility indifference prices and optimal purchasing quantities for a
non-traded contingent claim in an incomplete semi-martingale market with
vanishing hedging errors. We make connections with the theory of large
deviations. We concentrate on sequences of semi-complete markets where in the
$n^{th}$ market, the claim $B_n$ admits the decomposition $B_n = D_n+Y_n$.
Here, $D_n$ is replicable by trading in the underlying assets $S_n$, but $Y_n$
is independent of $S_n$. Under broad conditions, we may assume that $Y_n$
vanishes in accordance with a large deviations principle as $n$ grows. In this
setting, for an exponential investor, we identify the limit of the average
indifference price $p_n(q_n)$, for $q_n$ units of $B_n$, as $n\rightarrow
\infty$. We show that if $|q_n|\rightarrow\infty$, the limiting price typically
differs from the price obtained by assuming bounded positions
$\sup_n|q_n|<\infty$, and the difference is explicitly identifiable using large
deviations theory. Furthermore, we show that optimal purchase quantities occur
at the large deviations scaling, and hence large positions arise endogenously
in this setting.

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The categories of this paper are: hep-ex
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The categories of this paper are: astro-ph
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The categories of this paper are: nlin
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The categories of this paper are: eess
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The categories of this paper are: alg-geom
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The categories of this paper are: stat
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The categories of this paper are: acc-phys
31
The categories of this paper are: ao-sci
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The categories of this paper are: hep-lat
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The categories of this paper are: atom-ph
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The categories of this paper are: nucl-th
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The categories of this paper are: chao-dyn
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The categories of this paper are: math-ph
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The categories of this paper are: gr-qc
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The categories of this paper are: solv-int
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The categories of this paper are: q-bio