RISK INDIFFERENCE PRICING IN JUMP DIFFUSION MARKETS

We study the risk indifference pricing principle in incomplete markets: The (seller's)  risk indifference price        is the initial payment that makes the  risk  involved for the seller of a contract equal to the risk involved if the contract is not sold, with no initial payment. We use stochastic control theory and PDE methods to find a formula for       and similarly for      . In particular, we prove that  where    p _low   and    p _up   are the lower and upper hedging prices, respectively.