Optimal consumption in discrete-time financial models with industrial investment opportunities and nonlinear returns

Details Optimal consumption in discrete-time financial models with industrial investment opportunities and nonlinear returns Optimal consumption in discrete-time financial models with industrial investment opportunities and nonlinear returns

2006-02-21

arxiv.org/abs/math/0602451v1

Annals of Applied Probability 2005, Vol. 15, No. 4, 2393-2421

Mathematics

Probability

Published at http://dx.doi.org/10.1214/105051605000000467 in the Annals of Applied Probability (http://www.imstat.org/aap/) by

Scientific paper

10.1214/105051605000000467

We consider a general discrete-time financial market with proportional transaction costs as in [Kabanov, Stricker and R\'{a}sonyi Finance and Stochastics 7 (2003) 403--411] and [Schachermayer Math. Finance 14 (2004) 19--48]. In addition to the usual investment in financial assets, we assume that the agents can invest part of their wealth in industrial projects that yield a nonlinear random return. We study the problem of maximizing the utility of consumption on a finite time period. The main difficulty comes from the nonlinearity of the nonfinancial assets' return. Our main result is to show that existence holds in the utility maximization problem. As an intermediary step, we prove the closedness of the set $A_T$ of attainable claims under a robust no-arbitrage property similar to the one introduced in [Schachermayer Math. Finance 14 (2004) 19--48] and further discussed in [Kabanov, Stricker and R\'{a}sonyi Finance and Stochastics 7 (2003) 403--411]. This allows us to provide a dual formulation for $A_T$.

Affiliated with

Also associated with

No associations

Rating

Optimal consumption in discrete-time financial models with industrial investment opportunities and nonlinear returns does not yet have a rating. At this time, there are no reviews or comments for this scientific paper.

If you have personal experience with Optimal consumption in discrete-time financial models with industrial investment opportunities and nonlinear returns, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and Optimal consumption in discrete-time financial models with industrial investment opportunities and nonlinear returns will most certainly appreciate the feedback.

Rate now

Comments { 0 }

Profile ID: LFWR-SCP-O-454430