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Robust Utility Maximization in Discrete-Time Markets with Friction


Neufeld, Ariel; Sikic, Mario (2018). Robust Utility Maximization in Discrete-Time Markets with Friction. SIAM Journal on Control and Optimization, 56(3):1912-1937.

Abstract

We study a robust stochastic optimization problem in the quasi-sure setting in discrete-time. We show that under a linearity-type condition the problem admits a maximizer. This condition is implied by the no-arbitrage condition in models of financial markets. As a corollary, we obtain existence of a utility maximizer in the frictionless market model, markets with proportional transaction costs and also more general convex costs, like in the case of market impact.

Abstract

We study a robust stochastic optimization problem in the quasi-sure setting in discrete-time. We show that under a linearity-type condition the problem admits a maximizer. This condition is implied by the no-arbitrage condition in models of financial markets. As a corollary, we obtain existence of a utility maximizer in the frictionless market model, markets with proportional transaction costs and also more general convex costs, like in the case of market impact.

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Additional indexing

Contributors:SIAM Journal on Control and Optimization
Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Scopus Subject Areas:Physical Sciences > Control and Optimization
Physical Sciences > Applied Mathematics
Scope:Discipline-based scholarship (basic research)
Language:English
Date:2018
Deposited On:18 Feb 2020 12:08
Last Modified:22 Jun 2024 01:43
Publisher:Society for Industrial and Applied Mathematics
ISSN:0363-0129
OA Status:Green
Publisher DOI:https://doi.org/10.1137/16M1101829
Official URL:https://epubs.siam.org/doi/abs/10.1137/16M1101829
Other Identification Number:merlin-id:17803
  • Content: Published Version