This paper discusses a new approach to contingent claim valuation in general incomplete market models. We determine the neutral derivative price which occurs if investors maximize their local utility and if derivative demand and supply are balanced. We also introduce the sensitivity process of a...

For utility maximization problems under proportional transaction costs, it has been observed that the original market with transaction costs can sometimes be replaced by a frictionless shadow market that yields the same optimal strategy and utility. However, the question of whether or not this...

In this paper two kinds of cumulant processes are studied in a general setting. These processes generalize the cumulant of an infinitely divisible random variable and they appear as the exponential compensator of a semimartingale. In a financial context cumulant processes lead to a generalized...

In this paper the neutral valuation approach is applied to American and game options in incomplete markets. Neutral prices occur if investors are utility maximizers and if derivative supply and demand are balanced. Game contingent claims are derivative contracts that can be terminated by both...