Multivariate Utility Maximization under Transaction Costs

Kenji Kamizono
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Kenji Kamizono: Faculty of Economics, Nagasaki University, 4-2-1 Katafuchi, Nagasaki, Nagasaki 850-8506, Japan

Chapter 7 in Stochastic Processes and Applications to Mathematical Finance, 2004, pp 133-149 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractWe consider a multivariate utility maximization problem in a general multiasset financial market with proportional transaction costs. Unlike the univariate utility case, it is essentially important to avoid the so-called money illusion in the multivariate utility framework. Our utility function depends on the physical amount of the assets rather than the market value of the assets. As such, our utility function can be interpreted as a direct utility function in microeconomics. We generalize the convex duality theory of Kramkov-Schachermayer [Ann. Appl. Probab., 9 (1999), pp. 904–950] to our multivariate utility setting.

Keywords: Stochastic Processes; Stochastic Differential Equations; Malliavin Calculus; Stochastic Control and Optimization; Functionals of Brownian Motions and Lévy Processes; Stochastic Models of Financial Market; Derivative Pricing; Hedging Problem (search for similar items in EconPapers)
Date: 2004
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