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State-Dependent Utilities and Incomplete Markets
Author
Source
Mathematical Problems in Engineering
Issue
Vol. 2013, Issue 2013 (31 Dec. 2013), pp.1-8, 8 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2013-05-16
Country of Publication
Egypt
No. of Pages
8
Main Subjects
Abstract EN
The problem of optimal consumption and investment for an agent that does not influence the market is solved.
The optimization criteria are based on a state-dependent utility functional as proposed in Londoño (2009).
The proposed solution is given in any market without state-tame arbitrage opportunities, includes several utilities structures, and includes incomplete markets where there are multiple state variables.
The solutions obtained for optimal wealths consumptions, and portfolios are explicit and easily computable; the main condition for the result to hold is that the income process of each agent is hedgeable, requiring a natural condition on employer and employee to agree on a contract whose risk can be managed by both parties.
In this paper we also developed a theory of markets when the processes are generalization of Brownian flows on manifolds, since this framework shows to be the natural one whenever the problem of intertemporal equilibrium is addressed.
American Psychological Association (APA)
Londoño, Jaime A.. 2013. State-Dependent Utilities and Incomplete Markets. Mathematical Problems in Engineering،Vol. 2013, no. 2013, pp.1-8.
https://search.emarefa.net/detail/BIM-1009122
Modern Language Association (MLA)
Londoño, Jaime A.. State-Dependent Utilities and Incomplete Markets. Mathematical Problems in Engineering No. 2013 (2013), pp.1-8.
https://search.emarefa.net/detail/BIM-1009122
American Medical Association (AMA)
Londoño, Jaime A.. State-Dependent Utilities and Incomplete Markets. Mathematical Problems in Engineering. 2013. Vol. 2013, no. 2013, pp.1-8.
https://search.emarefa.net/detail/BIM-1009122
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-1009122