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Martingale Measure Method for Expected Utility Maximization in Discrete-Time Incomplete Markets

Listed author(s):
  • Ping Li


    (Institute of Systems Science, Academy of Mathematics and Systems Science, The Chinese Academy of Sciences)

  • Jianming Xia


    (Institute of Applied Mathematics, Academy of Mathematics and Systems Science, The Chinese Academy of Sciences)

  • Jia-an Yan


    (Institute of Applied Mathematics, Academy of Mathematics and Systems Science, The Chinese Academy of Sciences)

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    In this paper we study the expected utility maximization problem for discretetime incomplete financial markets. As shown by Xia and Yan (2000a, 2000b) in the continuous-time case, this problem can be solved by the martingale measure method. In a special discrete-time model, we explicitly work out the optimal trading strategies and the associated minimum relative entropy martingale measures and minimum Hellinger-Kakutani distance martingale measures.

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    Article provided by Society for AEF in its journal Annals of Economics and Finance.

    Volume (Year): 2 (2001)
    Issue (Month): 2 (November)
    Pages: 445-465

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    Handle: RePEc:cuf:journl:y:2001:v:2:i:2:p:445-465
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