A unified framework for utility maximization problems: An Orlicz space approach

convex duality incomplete market utility maximization Orlicz space singular functionals \(\sigma \)-martingale measure nonlocally bounded semimartingale

Mathematics Subject Classification ID

Applications of functional analysis in probability theory and statistics (46N30) Generalizations of martingales (60G48) Utility theory (91B16) Spaces of measurable functions ((L^p)-spaces, Orlicz spaces, Köthe function spaces, Lorentz spaces, rearrangement invariant spaces, ideal spaces, etc.) (46E30) Martingales with continuous parameter (60G44) Duality theory (optimization) (49N15)

Abstract: We consider a stochastic financial incomplete market where the price processes are described by a vector-valued semimartingale that is possibly nonlocally bounded. We face the classical problem of utility maximization from terminal wealth, with utility functions that are finite-valued over

(a, i n f t y)

,

a i n l b r a c k - i n f t y, i n f t y)

, and satisfy weak regularity assumptions. We adopt a class of trading strategies that allows for stochastic integrals that are not necessarily bounded from below. The embedding of the utility maximization problem in Orlicz spaces permits us to formulate the problem in a unified way for both the cases

a i n m a t h b b R

and

a = - i n f t y

. By duality methods, we prove the existence of solutions to the primal and dual problems and show that a singular component in the pricing functionals may also occur with utility functions finite on the entire real line.

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