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Optimal investment with random endowments in incomplete markets

Abstract:

In this paper, we study the problem of expected utility maximization of an agent who, in addition to an initial capital, receives random endowments at maturity. Contrary to previous studies, we treat as the variables of the optimization problem not only the initial capital but also the number of units of the random endowments. We show that this approach leads to a dual problem, whose solution is always attained in the space of random variables. In particular, this technique does not require t...

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Publication status:
Published

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Publisher copy:
10.1214/105051604000000134

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Institution:
University of Oxford
Department:
Oxford, MPLS, Mathematical Inst
Role:
Author
Journal:
Annals of Applied Probability
Volume:
14
Issue:
2
Pages:
845-864
Publication date:
2004-05-14
DOI:
EISSN:
1050-5164
ISSN:
1050-5164
URN:
uuid:26ff8c35-fde1-42cf-8786-94c81111023b
Source identifiers:
25964
Local pid:
pubs:25964
Language:
English
Keywords:

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