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On utility maximization with derivatives under model uncertainty

Research paper by Erhan Bayraktar, Zhou Zhou

Indexed on: 17 Jul '13Published on: 17 Jul '13Published in: Mathematics - Probability



Abstract

We consider the robust utility maximization using a static holding in derivatives and a dynamic holding in the stock. There is no fixed model for the price of the stock but we consider a set of probability measures (models) which are not necessarily dominated by a fixed probability measure. By assuming that the set of physical probability measures is convex and weakly compact, we obtain the duality result and the existence of an optimizer.