The asymptotic elasticity of utility functions and optimal investment in incomplete markets

Dimitrij O. Kramkov, Walter Schachermayer

Publication: Working/Discussion PaperWU Working Paper

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Abstract

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 theory to hold true is the requirement that the asymptotic elasticity of the utility function is strictly less then one. (author's abstract)
Original languageEnglish
Place of PublicationVienna
PublisherSFB Adaptive Information Systems and Modelling in Economics and Management Science, WU Vienna University of Economics and Business
Publication statusPublished - 1999

Publication series

NameReport Series SFB "Adaptive Information Systems and Modelling in Economics and Management Science"
No.25

WU Working Paper Series

  • Report Series SFB \Adaptive Information Systems and Modelling in Economics and Management Science\

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