Stability of Utility Maximization in Nonequivalent Markets

Abstract:  Consider a contingent claim whose underlying is not replicable yet is highly correlated with a traded asset.  As the correlation between the underlying and traded asset increases to 1, do the claim's indifference prices converge to the arbitrage-free price?  In this talk, I'll first present a simple counterexample in a Brownian setting with power utility where the indifference prices do not converge.  The counterexample's degeneracies are alleviated for utility functions on the real line, and a positive convergence result will be presented in this case.