Stability of exponential utility maximization with respect to market perturbations

DOI10.1016/J.SPA.2012.12.007MaRDI QIDQ1947599zbMATH OpenOpenAlexFDO

Authors Erhan Bayraktar, Ross Kravitz

Publication date 22 April 2013

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

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

zbMATH Keywords

\(V\)-compactnessBMO martingalescontinuous semi-martingalesstability with respect to market price of riskutility maximization on the real line

Mathematics Subject Classification ID

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

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.

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Cited in

(11)

• Sensitivity analysis of the utility maximisation problem with respect to model perturbations
• Continuity of utility maximization under weak convergence
• Structural stability threshold for the condition of robust no deterministic sure arbitrage with unbounded profit
• Utility maximization problem with transaction costs: optimal dual processes and stability
• On convergence to the exponential utility problem
• Stability of utility-maximization in incomplete markets
• The stability of the constrained utility maximization problem: a BSDE approach
• Stability of utility maximization in nonequivalent markets
• Stability of the exponential utility maximization problem with respect to preferences
• STABILITY OF THE UTILITY MAXIMIZATION PROBLEM WITH RANDOM ENDOWMENT IN INCOMPLETE MARKETS
• Stability of the indirect utility process

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