Optimal consumption of multiple goods in incomplete markets

DOI10.1017/JPR.2018.51MaRDI QIDQ4555291zbMATH OpenOpenAlexWikidataFDO

Authors Oleksii Mostovyi

Publication date 19 November 2018

Published in Journal of Applied Probability (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1705.02291

zbMATH Keywords

arbitrage of the first kindduality theoryincomplete marketlocal martingale deflatormultiple goodsno unbounded profit with bounded riskoptimal consumptionoptimal investmentsemimartingaleutility maximization

Mathematics Subject Classification ID

Duality theory (optimization) (49N15) Generalizations of martingales (60G48) Portfolio theory (91G10) Optimal stochastic control (93E20)

Abstract: We consider the problem of optimal consumption of multiple goods in incomplete semimartingale markets. We formulate the dual problem and identify conditions that allow for existence and uniqueness of the solution and give a characterization of the optimal consumption strategy in terms of the dual optimizer. We illustrate our results with examples in both complete and incomplete models. In particular, we construct closed-form solutions in some incomplete models.

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Cited in

(5)

• Optimal consumption from investment and random endowment in incomplete semimartingale markets.
• A martingale approach to optimal portfolios with jump-diffusions
• OPTIMAL CONTINGENT CLAIMS AND CONSUMPTION
• Optimal consumption strategies under model uncertainty
• The structure of optimal consumption streams in general incomplete markets

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