Muckenhoupt's (A_p) condition and the existence of the optimal martingale measure

DOI10.1016/J.SPA.2016.02.012zbMATH Open1346.60059arXiv1507.05865OpenAlexW2276113211MaRDI QIDQ737172FDOQ737172

Authors: Dmitry Kramkov, Kim Weston 

Publication date: 8 August 2016

Published in: Stochastic Processes and their Applications (Search for Journal in Brave)

Abstract: In the problem of optimal investment with utility function defined on $(0,infty)$, we formulate sufficient conditions for the dual optimizer to be a uniformly integrable martingale. Our key requirement consists of the existence of a martingale measure whose density process satisfies the probabilistic Muckenhoupt $(A_p)$ condition for the power $p=1/(1-a)$, where $ain(0,1)$ is a lower bound on the relative risk-aversion of the utility function. We construct a counterexample showing that this $(A_p)$ condition is sharp.

Full work available at URL: https://arxiv.org/abs/1507.05865

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zbMATH Keywords

utility maximizationBMO martingales\((A_p)\) conditionoptimal martingale measure

Mathematics Subject Classification ID

Portfolio theory (91G10) Utility theory (91B16) Existence of optimal solutions to problems involving randomness (49J55) Martingales with continuous parameter (60G44)

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Cited In (6)

• On the support of extremal martingale measures with given marginals: the countable case
• On the existence of competitive equilibrium in frictionless and incomplete stochastic asset markets
• A CAPM with trading constraints and price bubbles
• Conditional Davis pricing
• On the dual problem of utility maximization in incomplete markets
• Uniqueness in Cauchy problems for diffusive real-valued strict local martingales

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