Utility maximization under increasing risk aversion in one-period models
Two financial securities are considered that can be traded at times \(0\) and \(T>0\). It is assumed that the price of the first security is always positive and the authors use it as numéraire. The time \(0\) price of the second security is a positive constant \(S_0\) while at time \(T\) it is \(S_t=S_0+\Delta S\) for a random variable \(\Delta S\). The convergence of the utility maximizing strategies under the risk aversion in the one-period model is studied. This is equivalent to studying the behaviour of the optimal terminal wealth corresponding to the initial value and payoff \(B\) of the contingent claims under increasing risk aversion. An example of the one-period model with bounded \(\Delta S\) and \(B\) such that the optimal strategies corresponding to \(B\) and exponential utility stay bounded but do not converge when the absolute risk aversion tends to infinity. The authors study the behaviour of utility maximizing strategies and terminal wealth under increasing risk aversion in general one-period models. This naturally leads to the concept of the balanced strategy which plays a crucial role.
- Risk aversion asymptotics for power utility maximization
- Utility maximization in models with conditionally independent increments
- Risk Averse Asymptotics and the Optional Decomposition
- Utility maximization, risk aversion, and stochastic dominance
- Robust utility maximizing strategies under model uncertainty and their convergence
- Utility maximization, risk aversion, and stochastic dominance
- Dynamic exponential utility indifference valuation
- Utility maximization in markets with bid-ask spreads
- Abstract, classic, and explicit turnpikes
- Risk Averse Asymptotics and the Optional Decomposition
- Convergence of utility indifference prices to the superreplication price
- Utility maximization under a shortfall risk constraint
- Convergence of utility indifference prices to the superreplication price: the whole real line case
This page was built for publication: Utility maximization under increasing risk aversion in one-period models
Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q2488511)
