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Preprints, Working Papers, ... Year : 2008

Utility maximization in incomplete markets with default

Abstract

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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Dates and versions

hal-00342531 , version 1 (27-11-2008)
hal-00342531 , version 2 (19-03-2009)
hal-00342531 , version 3 (09-07-2010)

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Thomas Lim, Marie-Claire Quenez. Utility maximization in incomplete markets with default. 2008. ⟨hal-00342531v3⟩
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