Explicit solutions of some utility maximization problems in incomplete markets

In this note we prove Hölder-type inequalities for products of certain functionals of correlated Brownian motions. These estimates are applied to the study of optimal portfolio choice in incomplete markets when the investor's utility is of the form U(X,Y)=g(X)h(Y), where X is the investor's wealth and Y is a random factor not perfectly correlated with the market. Explicit solutions are found when g is the exponential, power, or logarithmic utility function.

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Year of publication:	2004
Authors:	Tehranchi, Michael
Published in:	Stochastic Processes and their Applications. - Elsevier, ISSN 0304-4149. - Vol. 114.2004, 1, p. 109-125
Publisher:	Elsevier
Keywords:	Expected utility Incomplete markets Portfolio optimization Distortion

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008875645