On utility maximization without passing by the dual problem
Abstract
We treat utility maximization from terminal wealth for an agent with utility function who dynamically invests in a continuous-time financial market and receives a possibly unbounded random endowment. We prove the existence of an optimal investment without introducing the associated dual problem. We rely on a recent result of Orlicz space theory, due to Delbaen and Owari which leads to a simple and transparent proof. Our results apply to non-smooth utilities and even strict concavity can be relaxed. We can handle certain random endowments with non-hedgeable risks, complementing earlier papers. Constraints on the terminal wealth can also be incorporated. As examples, we treat frictionless markets with finitely many assets and large financial markets.
Keywords
Cite
@article{arxiv.1702.00982,
title = {On utility maximization without passing by the dual problem},
author = {Miklos Rasonyi},
journal= {arXiv preprint arXiv:1702.00982},
year = {2018}
}
Comments
Corrections in the proof of Theorem 3.6, modified definition of Fatou convergence and changes in Lemma 4.1