Utility maximization in incomplete markets with default

Details Utility maximization in incomplete markets with default Utility maximization in incomplete markets with default

2008-11-28

arxiv.org/abs/0811.4715v3

Economy

Quantitative Finance

Computational Finance

Scientific paper

We adress the maximization problem of expected utility from terminal wealth. The special feature of this paper is that we consider a financial market where the price process of risky assets can have a default time. Using dynamic programming, we characterize the value function with a backward stochastic differential equation and the optimal portfolio policies. We separately treat the cases of exponential, power and logarithmic utility.

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