This paper proves that in smaller market it is optimal to invest the initial endowment into the bond.

Following [10] we continue the study of the problem of expected utility maximization in incomplete markets. Our goal is to find minimal conditions on a model and a utility function for the validity of several key assertions of the theory to hold true....

Autoren-Abstract: This paper solves a long-standing open problem in mathematical finance: to find a solution to the problem of maximizing utility from terminal wealth of an agent with a random endowment process, in the general, semimartingale model for incomplete markets, and to characterize it...

An installment option is a European option in which the premium, instead of being paid up-front, is paid in a series of installments. If all installments are paid the holder receives the exercise value, but the holder has the right to terminate payments on any payment date, in which case the...

This paper accompanies a previous one from 1999 by D. Kramkov and the present author. There, we considered utility functions $U:\R_+ \to \R$ satisfying the Inada conditions $U'(0)=\infty$ and $U'(\infty)=0$, in the present paper we consider utility functions $U:\R\to\R$ which are finitely...

A consequence of the Hahn-Banach theorem is the classical bipolar theorem which states that the bipolar of a subset of a locally convex vector pace equals its closed convex hull.(...)

The Fundamental Theorem of Asset Pricing states - roughly speaking - that the absence of arbitrage possibilities for a stochastic process S is equivalent to the existence of an equivalent martingale measure for S. It turns out that it is quite hard to give precise and sharp versions of this...

We consider an option c which is contingent on an underlying (tilde S) that is not a traded asset. This situation typically arises in the context of real options. We investigate the situation when there is a "surrogate" traded asset S whose price process is highly correlated with that of (tilde...

The paper studies the problem of maximizing the expected utility of terminal wealth in the framework of a general incomplete semimartingale model of a financial market. We show that the necessary and sufficient condition on a utility function for the validity of several key assertions of the...

In a market with one safe and one risky asset, an investor with a long horizon, constantinvestment opportunities, and constant relative risk aversion trades with small proportionaltransaction costs. We derive explicit formulas for the optimal investment policy, its impliedwelfare, liquidity...