Exponential utility maximization under model uncertainty for unbounded endowments
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Publication:670752
DOI10.1214/18-AAP1428zbMATH Open1419.91285arXiv1610.00999WikidataQ115517779 ScholiaQ115517779MaRDI QIDQ670752FDOQ670752
Publication date: 20 March 2019
Published in: The Annals of Applied Probability (Search for Journal in Brave)
Abstract: We consider the robust exponential utility maximization problem in discrete time: An investor maximizes the worst case expected exponential utility with respect to a family of nondominated probabilistic models of her endowment by dynamically investing in a financial market, and statically in available options. We show that, for any measurable random endowment (regardless of whether the problem is finite or not) an optimal strategy exists, a dual representation in terms of (calibrated) martingale measures holds true, and that the problem satisfies the dynamic programming principle (in case of no options). Further it is shown that the value of the utility maximization problem converges to the robust superhedging price as the risk aversion parameter gets large, and examples of nondominated probabilistic models are discussed.
Full work available at URL: https://arxiv.org/abs/1610.00999
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