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Paolo Guasoni, Walter Schachermayer

Necessary conditions for the existence of utility maximizing strategies under transaction costs

For any utility function with asymptotic elasticity equal to one, we construct a market model in countable discrete time, such that the utility maximization problem with proportional transaction costs admits no solution.

This proves that the necessity of the reasonable asymptotic elasticity condition, established by Kramkov and Schachermayer [KS99] in the frictionless case, remains also valid in the presence of transaction costs.

Statistics & Decisions, Oldenbourg Wissenschaftsverlag

Print ISSN: 0721-2631
Volume: 22, 02/2004
Pages: 153 - 170

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