Convergence of utility indifference prices to the superreplication price in a multiple-priors framework

This paper formulates a utility indifference pricing model for investors trading in a discrete time financial market under non-dominated model uncertainty. The investors preferences are described by strictly increasing concave... [ view full abstract ]

This paper formulates a utility indifference pricing model for investors trading in a discrete time financial market under non-dominated model uncertainty. The investors preferences are described by strictly increasing concave (possibly) random functions defined on the positive axis. In this multiple-priors framework we prove that the utility indifference price of some contingent claim converges to its superreplication price when the investor absolute risk-aversion tends to infinity. We also revisit the notion of certainty equivalent and establish its relation with the absolute risk aversion.