Utility Maximization on the Real Line under Proportional Transaction Costs
Bouchard, Bruno (2002), Utility Maximization on the Real Line under Proportional Transaction Costs, Finance and Stochastics, 6, 4, p. 495-516. http://dx.doi.org/10.1007/s007800200068
Type
Article accepté pour publication ou publiéDate
2002Journal name
Finance and StochasticsVolume
6Number
4Publisher
Springer
Pages
495-516
Publication identifier
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Bouchard, BrunoAbstract (EN)
We consider a financial market with costs as in Kabanov and Last (1999). Given a utility function defined on ${\mathbb R}$, we analyze the problem of maximizing the expected utility of the liquidation value of terminal wealth diminished by some random claim. We prove that, under the Reasonable asymptotic elasticity conditions introduced by Schachermayer (2000a), existence and duality hold in the class of targets that can be approximated by bounded from below strategies. Under some additional condition, we prove that the optimal target is indeed attainable. As an application, we obtain a dual formulation for the exponential reservation price.Subjects / Keywords
option pricing; Transaction costs; utility maximization; reasonable asymptotic elasticity; hedgingRelated items
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