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Necessary and sufficient conditions in the problem of optimal investment in incomplete markets

Kramkov, Dimitrij O. and Schachermayer, Walter (2001) Necessary and sufficient conditions in the problem of optimal investment in incomplete markets. Working Papers SFB "Adaptive Information Systems and Modelling in Economics and Management Science", 84. SFB Adaptive Information Systems and Modelling in Economics and Management Science, WU Vienna University of Economics and Business, Vienna.

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Abstract

Following [10] we continue the study of the problem of expected utility maximization in incomplete markets. Our goal is to find minimal conditions on a model and a utility function for the validity of several key assertions of the theory to hold true. In [10] we proved that a minimal condition on the utility function alone, i.e. a minimal market independent condition, is that the asymptotic elasticity of the utility function is strictly less than 1. In this paper we show that a necessary and sufficient condition on both, the utility function and the model, is that the value function of the dual problem is finite. (authors' abstract)

Item Type: Paper
Keywords: utility maximization / incomplete markets / Legendre transformation / duality theory
Classification Codes: JEL G11, G12, C61
Divisions: Departments > Finance, Accounting and Statistics > Statistics and Mathematics
Departments > Informationsverarbeitung u Prozessmanag. > Informationswirtschaft
Departments > Informationsverarbeitung u Prozessmanag. > Produktionsmanagement > Taudes
Departments > Marketing > Tourismus und Freizeitwirtschaft
Depositing User: Repository Administrator
Date Deposited: 16 Apr 2002 13:30
Last Modified: 27 Jan 2011 08:55
WU Online Catalog: http://onlinekatalog.wu.ac.at/F?func=find-b&reques...
URI: http://epub.wu.ac.at/id/eprint/1568

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