Utility Maximization in Imperfected Markets

Long Nguyen-Thanh

Finance from University Library of Munich, Germany

Abstract: We analyze a problem of maximization of expected terminal wealth and consumption in markets with some ``imperfection'', such as constraints on the permitted portfolios, labor income, or/and nonlinearity of portfolio dynamics. By using general optional decomposition under constraints in multiplicative form, we develop a dual formulation. Then, under some conditions imposed on the model setting and the utility functions, we are able to prove an existence and uniqueness of an optimal solution to primal and to the corresponding dual problem by convex duality.

Keywords: Stochastic Optimization; Utility Optimization; Duality Theory; Convex and State Constraints; Optional Decomposition; Optimal Stopping (search for similar items in EconPapers)
JEL-codes: G11 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2003-01-21, Revised 2003-03-23
New Economics Papers: this item is included in nep-mic
Note: Type of Document - Tex/WordPerfect/Handwritten; prepared on IBM PC - PC-TEX/UNIX Sparc TeX; to print on HP/PostScript/Franciscan monk; pages: 41; figures: included/request from author/draw your own
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpfi:0301007

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