Utility Maximization with a Stochastic Clock and an Unbounded Random Endowment
We introduce a linear space of finitely additive measures to treat the problem of optimal expected utility from consumption under a stochastic clock and an unbounded random endowment process. In this way we establish existence and uniqueness for a large class of utility-maximization problems including the classical ones of terminal wealth or consumption, as well as the problems that depend on a random time horizon or multiple consumption instances. As an example we explicitly treat the problem of maximizing the logarithmic utility of a consumption stream, where the local time of an Ornstein-Uhlenbeck process acts as a stochastic clock.
|Date of creation:||Mar 2005|
|Date of revision:|
|Publication status:||Published in Annals of Applied Probability 2005, Vol. 15, No. 1B, 748-777|
|Contact details of provider:|| Web page: http://arxiv.org/|
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- (**), 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.
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