Utility maximization under increasing risk aversion in one-period models
It has been shown at different levels of generality that under increasing risk aversion utility indifference sell prices of a contingent claim converge to the super-replication price and the shortfalls of utility maximizing hedging portfolios starting from the super-replication price tend to zero in L 1 . In this paper we give an example of a one-period financial model with bounded prices where utility optimal strategies and terminal wealths stay bounded but do not converge when the risk aversion is going to infinity. Then we give general results on the behavior of utility maximizing strategies and terminal wealths under increasing risk aversion in one-period models. The concept of a balanced strategy turns out to play a crucial role. Copyright Springer-Verlag Berlin/Heidelberg 2006
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 10 (2006)
Issue (Month): 1 (01)
|Contact details of provider:|| Web page: http://www.springerlink.com/content/101164/ |
|Order Information:||Web: http://link.springer.de/orders.htm|
When requesting a correction, please mention this item's handle: RePEc:spr:finsto:v:10:y:2006:i:1:p:147-158. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn)or (Christopher F Baum)
If references are entirely missing, you can add them using this form.