Facelifting in utility maximization
Kasper Larsen (),
Halil Soner () and
Gordan Žitković ()
Finance and Stochastics, 2016, vol. 20, issue 1, 99-121
We establish the existence and characterization of a primal and a dual facelift—discontinuity of the value function at the terminal time—for utility maximization in incomplete semimartingale-driven financial markets. Unlike in the lower and upper hedging problems, and somewhat unexpectedly, a facelift turns out to exist in utility maximization despite strict convexity in the objective function. In addition to discussing our results in their natural, Markovian environment, we also use them to show that the dual optimizer cannot be found in the set of countably additive (martingale) measures in a wide variety of situations. Copyright Springer-Verlag Berlin Heidelberg 2016
Keywords: Boundary layer; Convex analysis; Convex duality; Facelift; Financial mathematics; Incomplete markets; Markov processes; Utility maximization; Unspanned endowment; 91G10; 91G80; 60K35; C61; G11 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:spr:finsto:v:20:y:2016:i:1:p:99-121
Ordering information: This journal article can be ordered from
http://www.springer. ... ance/journal/780/PS2
Access Statistics for this article
Finance and Stochastics is currently edited by M. Schweizer
More articles in Finance and Stochastics from Springer
Series data maintained by Sonal Shukla ().