Stability of utility maximization in nonequivalent markets

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Stability of the utility maximization problem with random endowment and indifference prices is studied for a sequence of financial markets in an incomplete Brownian setting. Our novelty lies in the nonequivalence of markets, in which the volatility of asset prices (as well as the drift) varies. Degeneracies arise from the presence of nonequivalence. In the positive real line utility framework, a counterexample is presented showing that the expected utility maximization problem can be unstable. A positive stability result is proved for utility functions on the entire real line.

Original languageEnglish (US)
Pages (from-to)511-541
Number of pages31
JournalFinance and Stochastics
Issue number2
StatePublished - Apr 1 2016
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Statistics and Probability
  • Finance
  • Statistics, Probability and Uncertainty


  • Expected utility theory
  • Incompleteness
  • Market stability
  • Nonequivalent markets
  • Random endowment


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