Henderson, Vicky and Hobson, David (David G.) (2007) Horizon-unbiased utility functions. In: 3rd Cornell, Columbia, Carnegie-Mellon, Princeton Conference on Mathematical Finance (CCCP), New York, NY, APR 28-29, 2006. Published in: Stochastic Processes and their Applications, Vol.117 (No.11). pp. 1621-1641.

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Abstract

In this paper we consider a class of mixed optimal control/optimal stopping problems related to the choice of the best time to sell a single unit of an indivisible asset. We assume that in addition to the indivisible asset, the agent has access to a financial market. Investments in the financial market can be used for hedging, but the financial assets are only partially correlated with the indivisible asset, so that the agent faces an incomplete markets problem. We show how, even in the infinite horizon case, it is possible to express the problem as a maximisation problem with respect to an inter-temporal utility function evaluated at the sale time, but that this objective function must satisfy consistency conditions over time. (C) 2007 Elsevier B.V. All rights reserved.

Item Type:	Conference Item (Paper)
Subjects:	Q Science > QA Mathematics
Divisions:	Faculty of Science > Statistics
Journal or Publication Title:	Stochastic Processes and their Applications
Publisher:	Elsevier Science BV
ISSN:	0304-4149
Date:	November 2007
Volume:	Vol.117
Number:	No.11
Number of Pages:	21
Page Range:	pp. 1621-1641
Identification Number:	10.1016/j.spa.2007.03.013
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access
Conference Paper Type:	Paper
Title of Event:	3rd Cornell, Columbia, Carnegie-Mellon, Princeton Conference on Mathematical Finance (CCCP)
Type of Event:	Conference
Location of Event:	New York, NY
Date(s) of Event:	APR 28-29, 2006
URI:	http://wrap.warwick.ac.uk/id/eprint/30737

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