Optimal investment and price dependence in a semi-static market

DOI10.1007/S00780-014-0245-8zbMATH Open1312.91083arXiv1303.0237OpenAlexW2145100155MaRDI QIDQ486934FDOQ486934

Authors: Pietro Siorpaes 

Publication date: 19 January 2015

Published in: Finance and Stochastics (Search for Journal in Brave)

Abstract: This paper studies the problem of maximizing expected utility from terminal wealth in a semi-static market composed of derivative securities, which we assume can be traded only at time zero, and of stocks, which can be traded continuously in time and are modeled as locally-bounded semi-martingales. Using a general utility function defined on the positive real line, we first study existence and uniqueness of the solution, and then we consider the dependence of the outputs of the utility maximization problem on the price of the derivatives, investigating not only stability but also differentiability, monotonicity, convexity and limiting properties.

Full work available at URL: https://arxiv.org/abs/1303.0237

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zbMATH Keywords

convex dualityincomplete marketwell-posed problemoptimal investmentprice dependencesemi-static market

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Portfolio theory (91G10) Generalizations of martingales (60G48) Utility theory (91B16) Duality theory (optimization) (49N15)

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Cited In (13)

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• Optimal investment with derivative securities
• A new approach to maximize the overall return on investment with price and stock dependent demand under the nonlinear holding cost
• Do arbitrage-free prices come from utility maximization?
• The space of outcomes of semi-static trading strategies need not be closed
• Utility maximization when shorting American options
• Optimal investment with derivatives and pricing in an incomplete market
• Optimal consumption of multiple goods in incomplete markets
• Investment effects of pricing schemes for non-convex markets
• Pricing for large positions in contingent claims
• Indifference pricing for contingent claims: large deviations effects
• Optimal investment in an illiquid market with search frictions and transaction costs

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