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Multivariate Utility Maximization under Transaction Costs

In: Stochastic Processes And Applications To Mathematical Finance

Author

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  • Kenji Kamizono

    (Faculty of Economics, Nagasaki University, 4-2-1 Katafuchi, Nagasaki, Nagasaki 850-8506, Japan)

Abstract

We consider a multivariate utility maximization problem in a general multiasset financial market with proportional transaction costs. Unlike the univariate utility case, it is essentially important to avoid the so-called money illusion in the multivariate utility framework. Our utility function depends on the physical amount of the assets rather than the market value of the assets. As such, our utility function can be interpreted as a direct utility function in microeconomics. We generalize the convex duality theory of Kramkov-Schachermayer [Ann. Appl. Probab., 9 (1999), pp. 904–950] to our multivariate utility setting.

Suggested Citation

  • Kenji Kamizono, 2004. "Multivariate Utility Maximization under Transaction Costs," World Scientific Book Chapters, in: Jiro Akahori & Shigeyoshi Ogawa & Shinzo Watanabe (ed.), Stochastic Processes And Applications To Mathematical Finance, chapter 7, pages 133-149, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812702852_0007
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    Cited by:

    1. Luciano Campi & Mark Owen, 2011. "Multivariate utility maximization with proportional transaction costs," Finance and Stochastics, Springer, vol. 15(3), pages 461-499, September.
    2. Alessandro Doldi & Marco Frittelli, 2019. "Multivariate Systemic Optimal Risk Transfer Equilibrium," Papers 1912.12226, arXiv.org, revised Oct 2021.
    3. Bernard, C. & De Gennaro Aquino, L. & Vanduffel, S., 2023. "Optimal multivariate financial decision making," European Journal of Operational Research, Elsevier, vol. 307(1), pages 468-483.
    4. Giuseppe Benedetti & Luciano Campi, 2011. "Multivariate utility maximization with proportional transaction costs and random endowment," Working Papers hal-00586377, HAL.
    5. repec:dau:papers:123456789/2318 is not listed on IDEAS

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