Utility Maximization with a Stochastic Clock and an Unbounded Random Endowment

By Gordan Zitkovic. 2005

51 citations recorded by the source corpus.

We introduce a linear space of finitely additive measures to treat the problem of optimal expected utility from consumption under a stochastic clock and an unbounded random endowment process. In this way we establish existence and uniqueness for a large class of utility-maximization problems including the classical ones of terminal wealth or consumption, as well as the problems that depend on a random time horizon or multiple consumption instances. As an example we explicitly treat the problem of maximizing the logarithmic utility of a consumption stream, where the local time of an Ornstein-Uhlenbeck process acts as a stochastic clock.

Subfields: Economics and Econometrics, Finance, Management Science and Operations Research

View Paper: https://www.semanticscholar.org/paper/a5886662f6e91880d18d43e0f8e23d72daeaf135

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In Economics and Econometrics

In Finance

In Management Science and Operations Research

Citations in the corpus

On some recent aspects of stochastic control and their applications (2005, background): “In the general random time case, the associated control problem has been relatively lightly studied in the literature, see [17] or [92] for a utility maximization problem in finance.”
A dual characterization of self-generation and exponential forward performances (2008, background): “Incompleteness or, in analytic language, lack of strict ellipticity renders the analysis much more delicate; in particular, as is well known in the utility maximization literature (see [7, 19, 21, 22] or [39] for a sample), the dual formulation introduces nontrivial functional-analytic difficulties.”