{"paper":{"title":"Pricing options on illiquid assets with liquid proxies using utility indifference and dynamic-static hedging","license":"http://arxiv.org/licenses/nonexclusive-distrib/1.0/","headline":"","cross_cats":["q-fin.CP","q-fin.GN"],"primary_cat":"q-fin.PR","authors_text":"Andrey Itkin, Igor Halperin","submitted_at":"2012-05-15T20:46:20Z","abstract_excerpt":"This work addresses the problem of optimal pricing and hedging of a European option on an illiquid asset Z using two proxies: a liquid asset S and a liquid European option on another liquid asset Y. We assume that the S-hedge is dynamic while the Y-hedge is static. Using the indifference pricing approach we derive a HJB equation for the value function, and solve it analytically (in quadratures) using an asymptotic expansion around the limit of the perfect correlation between assets Y and Z. While in this paper we apply our framework to an incomplete market version of the credit-equity Merton's"},"claims":{"count":0,"items":[],"snapshot_sha256":"258153158e38e3291e3d48162225fcdb2d5a3ed65a07baac614ab91432fd4f57"},"source":{"id":"1205.3507","kind":"arxiv","version":1},"verdict":{"id":null,"model_set":{},"created_at":null,"strongest_claim":"","one_line_summary":"","pipeline_version":null,"weakest_assumption":"","pith_extraction_headline":""},"references":{"count":0,"sample":[],"resolved_work":0,"snapshot_sha256":"258153158e38e3291e3d48162225fcdb2d5a3ed65a07baac614ab91432fd4f57","internal_anchors":0},"formal_canon":{"evidence_count":0,"snapshot_sha256":"258153158e38e3291e3d48162225fcdb2d5a3ed65a07baac614ab91432fd4f57"},"author_claims":{"count":0,"strong_count":0,"snapshot_sha256":"258153158e38e3291e3d48162225fcdb2d5a3ed65a07baac614ab91432fd4f57"},"builder_version":"pith-number-builder-2026-05-17-v1"}