state-dependent utilities and incomplete markets

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ID: 223202
2013
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Abstract
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.
Reference Key
londoo2013mathematicalstate-dependent Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors ;Jaime A. Londoño
Journal journal of power sources
Year 2013
DOI
10.1155/2013/359701
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