Admissible strategies in semimartingale portfolio selectionSara Biagini and Ales Cerny No 117, Carlo Alberto Notebooks from Collegio Carlo Alberto Abstract: The choice of admissible trading strategies in mathematical modelling of financial markets is a delicate issue, going back to Harrison and Kreps [HK79]. In the context of optimal portfolio selection with expected utility preferences this question has been a focus of considerable attention over the last twenty years. We propose a novel notion of admissibility that has many pleasant features - admissibility is characterized purely under the objective measure P; the wealth of any admissible strategy is a supermartingale under all pricing measures; local boundedness of the price process is not required; neither strict monotonicity, strict concavity nor differentiability of the utility function are necessary; the definition encompasses both the classical mean-variance preferences and the monotone expected utility. For utility functions finite on R, our class represents a minimal set containing simple strategies which also contains the optimizer, under conditions that are substantially milder than the celebrated Reasonable Asymptotic Elasticity condition on the utility function. In particular, no condition on the behavior of the utility at minus infinity is needed. Keywords: utility maximization; non locally bounded semimartingale; incomplete market; Orlicz space; convex duality (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: http://EconPapers.repec.org/RePEc:cca:wpaper:117 Access Statistics for this paper More papers in Carlo Alberto Notebooks from Collegio Carlo Alberto |
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