The asymptotic elasticity of utility functions and optimal investment in incomplete markets

D. Kramkov, W. Schachermayer
1999 The Annals of Applied Probability  
The paper studies the problem of maximizing the expected utility of terminal wealth in the framework of a general incomplete semimartingale model of a nancial market. We s h o w that the necessary and su cient condition on a utility function for the validity o f s e v eral key assertions of the theory to hold true is the requirement that the asymptotic elasticity of the utility function is strictly less then one.
doi:10.1214/aoap/1029962818 fatcat:6ersxs6ge5aw7kxynqjn2b6p5a