scholarly journals Multivariate Utility Maximization with Proportional Transaction Costs and Random Endowment

2012 ◽  
Vol 50 (3) ◽  
pp. 1283-1308 ◽  
Author(s):  
Giuseppe Benedetti ◽  
Luciano Campi
Keyword(s):  
Transaction Costs ◽  
Utility Maximization ◽  
Proportional Transaction Costs ◽  
Random Endowment

scholarly journals Utility Maximization with Proportional Transaction Costs Under Model Uncertainty

2020 ◽  
Vol 45 (4) ◽  
pp. 1210-1236 ◽  
Author(s):  
Shuoqing Deng ◽  
Xiaolu Tan ◽  
Xiang Yu
Keyword(s):  
Dynamic Programming ◽  
Transaction Costs ◽  
Model Uncertainty ◽  
Utility Maximization ◽  
Exponential Utility ◽  
Market Condition ◽  
Maximization Problem ◽  
Proportional Transaction Costs ◽  
Utility Indifference ◽  
Basic Features

We consider a discrete time financial market with proportional transaction costs under model uncertainty and study a numéraire-based semistatic utility maximization problem with an exponential utility preference. The randomization techniques recently developed in Bouchard, Deng, and Tan [Bouchard B, Deng S, Tan X (2019) Super-replication with proportional transaction cost under model uncertainty. Math. Finance 29(3):837–860.], allow us to transform the original problem into a frictionless counterpart on an enlarged space. By suggesting a different dynamic programming argument than in Bartl [Bartl D (2019) Exponential utility maximization under model uncertainty for unbounded endowments. Ann. Appl. Probab. 29(1):577–612.], we are able to prove the existence of the optimal strategy and the convex duality theorem in our context with transaction costs. In the frictionless framework, this alternative dynamic programming argument also allows us to generalize the main results in Bartl [Bartl D (2019) Exponential utility maximization under model uncertainty for unbounded endowments. Ann. Appl. Probab. 29(1):577–612.] to a weaker market condition. Moreover, as an application of the duality representation, some basic features of utility indifference prices are investigated in our robust setting with transaction costs.

Sign in / Sign up

Export Citation Format

Share Document