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Optimal investment with intermediate consumption and random endowment

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  • Oleksii Mostovyi
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    Abstract

    We consider a problem of optimal investment with intermediate consumption and random endowment in an incomplete semimartingale model of a financial market. We establish the key assertions of the utility maximization theory assuming that both primal and dual value functions are finite in the interiors of their domains as well as that random endowment at maturity can be dominated by the terminal value of a self-financing wealth process. In order to facilitate verification of these conditions, we present alternative, but equivalent conditions, under which the conclusions of the theory hold.

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    File URL: http://arxiv.org/pdf/1110.2573
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    Bibliographic Info

    Paper provided by arXiv.org in its series Papers with number 1110.2573.

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    Date of creation: Oct 2011
    Date of revision: Oct 2012
    Handle: RePEc:arx:papers:1110.2573

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    1. (**), Hui Wang & Jaksa Cvitanic & (*), Walter Schachermayer, 2001. "Utility maximization in incomplete markets with random endowment," Finance and Stochastics, Springer, vol. 5(2), pages 259-272.
    2. Cuoco, Domenico, 1997. "Optimal Consumption and Equilibrium Prices with Portfolio Constraints and Stochastic Income," Journal of Economic Theory, Elsevier, vol. 72(1), pages 33-73, January.
    3. Gordan Zitkovic, 2005. "Utility Maximization with a Stochastic Clock and an Unbounded Random Endowment," Papers math/0503516, arXiv.org.
    4. Julien Hugonnier & Dmitry Kramkov, 2004. "Optimal investment with random endowments in incomplete markets," Papers math/0405293, arXiv.org.
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