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Finance and Stochastics

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01-04-2016

Stability of utility maximization in nonequivalent markets

Author: Kim Weston

Published in: Finance and Stochastics | Issue 2/2016

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Abstract

Stability of the utility maximization problem with random endowment and indifference prices is studied for a sequence of financial markets in an incomplete Brownian setting. Our novelty lies in the nonequivalence of markets, in which the volatility of asset prices (as well as the drift) varies. Degeneracies arise from the presence of nonequivalence. In the positive real line utility framework, a counterexample is presented showing that the expected utility maximization problem can be unstable. A positive stability result is proved for utility functions on the entire real line.

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Title: Stability of utility maximization in nonequivalent markets
Author: Kim Weston
Publication date: 01-04-2016
Publisher: Springer Berlin Heidelberg
Published in: Finance and Stochastics / Issue 2/2016
Print ISSN: 0949-2984
Electronic ISSN: 1432-1122
DOI: https://doi.org/10.1007/s00780-016-0289-z

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