Utility maximization in incomplete markets with random endowment

Author Info

• (**), Hui Wang

()

(Department of Statistics, Columbia University, New York, NY 10027, USA Manuscript)

• Jaksa Cvitanic

()

(Department of Mathematics, USC, 1042 W 36 Pl, DRB 155, Los Angeles, CA 90089-1113, USA)

• (*), Walter Schachermayer

()

(Department of Statistics, Probability Theory and Actuarial Mathematics, Vienna University of Technology, Wiedner Hauptstrasse 8-10, A-1040 Wien, Austria)

Registered author(s):

Abstract

This paper solves the following problem of mathematical finance: to find a solution to the problem of maximizing utility from terminal wealth of an agent with a random endowment process, in the general, semimartingale model for incomplete markets, and to characterize it via the associated dual problem. We show that this is possible if the dual problem and its domain are carefully defined. More precisely, we show that the optimal terminal wealth is equal to the inverse of marginal utility evaluated at the solution to the dual problem, which is in the form of the regular part of an element of $({\bf L}^\infty)^*$ (the dual space of ${\bf L}^\infty$).

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.

Bibliographic Info

Article provided by Springer in its journal Finance and Stochastics.

Volume (Year): 5 (2001)
Issue (Month): 2 ()
Pages: 259-272

as
in new window

References

No references listed on IDEAS
You can help add them by filling out this form.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Corrections

When requesting a correction, please mention this item's handle: RePEc:spr:finsto:v:5:y:2001:i:2:p:259-272. 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 you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.