The idea of gamblers ranking risky lotteries by their expected utilities dates back to Bernoulli
[22]. An individual's certainty equivalent amount is the certain amount of money that makes …

The chapter gives a broad outline of the central themes of credit risk modeling starting with
the modeling of default probabilities, ratings and recovery. We present the two main …

We solve the problem of hedging a contingent claim B by maximizing the expected
exponential utility of terminal net wealth for a locally bounded semimartingale X. We prove a …

This is the first book about the emerging field of utility indifference pricing for valuing
derivatives in incomplete markets. René Carmona brings together a who's who of leading …

We develop a methodology for optimal design of financial instruments aimed to hedge some
forms of risk that is not traded on financial markets. The idea is to minimize the risk of the …

A topical problem is how to price and hedge claims on nontraded assets. A natural approach
is to use for hedging purposes another similar asset or index which is traded. To model this …

The question of pricing and hedging a given contingent claim has a unique solution in a
complete market framework. When some incompleteness is introduced, the problem …

We develop a methodology to optimally design a financial issue to hedge non-tradable risk
on financial markets. Economic agents assess their risk using monetary risk measure. The …

We consider an investor maximizing his expected utility from terminal wealth with portfolio
decisions based on the available information flow. This investor faces the opportunity to …

We study a rational valuation and hedging principle for contingent claims which integrate
tradable and non-tradable sources of risk. The principle is based on the preferences of a …