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On utility maximization with derivatives under model uncertainty

  • Erhan Bayraktar
  • Zhou Zhou

We consider the robust utility maximization using a static holding in derivatives and a dynamic holding in the stock. There is no fixed model for the price of the stock but we consider a set of probability measures (models) which are not necessarily dominated by a fixed probability measure. By assuming that the set of physical probability measures is convex and weakly compact, we obtain the duality result and the existence of an optimizer.

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File URL: http://arxiv.org/pdf/1307.4813
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Paper provided by arXiv.org in its series Papers with number 1307.4813.

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Date of creation: Jul 2013
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Handle: RePEc:arx:papers:1307.4813
Contact details of provider: Web page: http://arxiv.org/

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  1. Bruno Bouchard & Marcel Nutz, 2013. "Arbitrage and duality in nondominated discrete-time models," Papers 1305.6008, arXiv.org, revised Mar 2015.
  2. Breeden, Douglas T & Litzenberger, Robert H, 1978. "Prices of State-contingent Claims Implicit in Option Prices," The Journal of Business, University of Chicago Press, vol. 51(4), pages 621-51, October.
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