Stability of exponential utility maximization with respect to market perturbations

DOI10.1016/J.SPA.2012.12.007zbMATH Open1272.91061arXiv1107.2716OpenAlexW2158193837MaRDI QIDQ1947599FDOQ1947599

Authors: Erhan Bayraktar, Ross Kravitz 

Publication date: 22 April 2013

Published in: Stochastic Processes and their Applications (Search for Journal in Brave)

Abstract: We investigate the continuity of expected exponential utility maximization with respect to perturbation of the Sharpe ratio of markets. By focusing only on continuity, we impose weaker regularity conditions than those found in the literature. Specifically, we require, in addition to the $V$-compactness hypothesis of Larsen and v{Z}itkovi'c (2007) (ArXiv: 0706.0474), a local $bmo$ hypothesis, a condition which is seen to always be trivially satisfied in the setting of Larsen and v{Z}itkovi'c (2007). For markets of the form $S=M+intlambdad<M>$, these conditions are simultaneously implied by the existence of a uniform bound on the norm of $lambdacdotM$ in a suitable $bmo$ space.

Full work available at URL: https://arxiv.org/abs/1107.2716

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zbMATH Keywords

BMO martingales\(V\)-compactnesscontinuous semi-martingalesstability with respect to market price of riskutility maximization on the real line

Mathematics Subject Classification ID

Utility theory (91B16) Martingales with continuous parameter (60G44)

Cited In (9)

• Utility maximization problem with transaction costs: optimal dual processes and stability
• STABILITY OF THE EXPONENTIAL UTILITY MAXIMIZATION PROBLEM WITH RESPECT TO PREFERENCES
• Stability of utility maximization in nonequivalent markets
• Continuity of utility maximization under weak convergence
• Stability of the Indirect Utility Process
• On convergence to the exponential utility problem
• Stability of utility-maximization in incomplete markets
• Structural stability threshold for the condition of robust no deterministic sure arbitrage with unbounded profit
• STABILITY OF THE UTILITY MAXIMIZATION PROBLEM WITH RANDOM ENDOWMENT IN INCOMPLETE MARKETS

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