Maximization of Non-Concave Utility Functions in Discrete-Time Financial Market Models

Laurence Carassus and Miklos Rasonyi

Papers from arXiv.org

Abstract: This paper investigates the problem of maximizing expected terminal utility in a (generically incomplete) discrete-time financial market model with finite time horizon. In contrast to the standard setting, a possibly non-concave utility function $U$ is considered, with domain of definition $\mathbb{R}$. Simple conditions are presented which guarantee the existence of an optimal strategy for the problem. In particular, the asymptotic elasticity of $U$ plays a decisive role: existence can be shown when it is strictly greater at $-\infty$ than at $+\infty$.

Date: 2013-02, Revised 2014-09
New Economics Papers: this item is included in nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1302.0134

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