Stability of the utility maximization problem with random endowment in incomplete markets
Portfolio Management
2010-03-17 v3 Optimization and Control
Probability
Abstract
We perform a stability analysis for the utility maximization problem in a general semimartingale model where both liquid and illiquid assets (random endowments) are present. Small misspecifications of preferences (as modeled via expected utility), as well as views of the world or the market model (as modeled via subjective probabilities) are considered. Simple sufficient conditions are given for the problem to be well-posed, in the sense the optimal wealth and the marginal utility-based prices are continuous functionals of preferences and probabilistic views.
Keywords
Cite
@article{arxiv.0706.0482,
title = {Stability of the utility maximization problem with random endowment in incomplete markets},
author = {Constantinos Kardaras and Gordan Zitkovic},
journal= {arXiv preprint arXiv:0706.0482},
year = {2010}
}