On utility maximization without passing by the dual problem

DOI10.1080/17442508.2018.1457677zbMATH Open1498.91406arXiv1702.00982OpenAlexW2586102631WikidataQ130043825 ScholiaQ130043825MaRDI QIDQ5086453FDOQ5086453

Authors: Miklós Rásonyi 

Publication date: 5 July 2022

Published in: Stochastics (Search for Journal in Brave)

Abstract: We treat utility maximization from terminal wealth for an agent with utility function $U:mathbbRomathbbR$ who dynamically invests in a continuous-time financial market and receives a possibly unbounded random endowment. We prove the existence of an optimal investment without introducing the associated dual problem. We rely on a recent result of Orlicz space theory, due to Delbaen and Owari which leads to a simple and transparent proof. Our results apply to non-smooth utilities and even strict concavity can be relaxed. We can handle certain random endowments with non-hedgeable risks, complementing earlier papers. Constraints on the terminal wealth can also be incorporated. As examples, we treat frictionless markets with finitely many assets and large financial markets.

Full work available at URL: https://arxiv.org/abs/1702.00982

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• scientific article; zbMATH DE number 5372060

zbMATH Keywords

transaction costsoptimal investmentutility functionlarge marketsunbounded random endowments

Mathematics Subject Classification ID

Portfolio theory (91G10) Utility theory (91B16) Martingales with continuous parameter (60G44) Applications of stochastic analysis (to PDEs, etc.) (60H30)

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Cited In (14)

• A note on the existence of the power investor's optimizer
• Robust utility maximization, \(f\)-projections, and risk constraints.
• Erratum to: ``Utility maximization in incomplete markets with random endowment
• Some functional analytic tools for utility maximization
• Robust utility maximisation in markets with transaction costs
• Constrained nonsmooth utility maximization on the positive real line
• Utility maximization in incomplete markets with random endowment
• A unified framework for utility maximization problems: An Orlicz space approach
• A non-calculus approach to solving the utility maximization problem using the Cobb-Douglas and CES utility function
• Utility maximization problem in the case of unbounded endowment
• Convex duality and Orlicz spaces in expected utility maximization
• Utility maximization with a given pricing measure when the utility is not necessarily concave
• Optimal investment and consumption with labor income in incomplete markets
• Existence of solutions in non-convex dynamic programming and optimal investment

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