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arXiv · 2610.17915

On integrability of local utility maximizing strategies

Aleš Černý·Johannes Ruf
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Abstract

In stochastic control problems involving optimal portfolio choice, one often seeks an optimizer of some local criterion (dynamic programming value function) generated by some global criterion (e.g., expected utility). The local optimizer then typically acts as a stochastic integrand with respect to some multivariate stochastic process (e.g., asset prices). This paper takes a closer look at local criteria in the form of ``local expected utility''. Since the existence of the local optimizer can be established under very mild conditions, it is crucial to understand under what circumstances the local optimizer has good integrability properties. It is shown that the reasonable asymptotic elasticity condition of Kramkov and Schachermayer (1999) applied to the local utility function plays a key role in this context.

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Aleš Černý, Johannes Ruf. 2026-10-13. On integrability of local utility maximizing strategies. https://arxiv.org/abs/2610.17915

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