Robust utility maximization for complete and incomplete market models

Anne Gundel ()

Finance and Stochastics, 2005, vol. 9, issue 2, 176 pages

Abstract: We investigate the problem of maximizing the robust utility functional $\inf_{Q \in \mathcal{Q}} E_Qu(X)$ . We give the dual characterization for its solution for both a complete and an incomplete market model. To this end, we introduce the new notion of reverse f-projections and use techniques developed for f-divergences. This is a suitable tool to reduce the robust problem to the classical problem of utility maximization under a certain measure: the reverse f-projection. Furthermore, we give the dual characterization for a closely related problem, the minimization of expenditures given a minimum level of expected utility in a robust setting and for an incomplete market. Copyright Springer-Verlag Berlin/Heidelberg 2005

Keywords: f-divergences; utility maximization; robust utility functionals; model uncertainty; incomplete markets; duality (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (27)

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DOI: 10.1007/s00780-004-0148-1

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