Zhang, Aihua A secret to create a complete market from an incomplete market. (English) Zbl 1193.91060 Appl. Math. Comput. 191, No. 1, 253-262 (2007). Summary: The Martingale method has been given increasing attention since it was conducted by Cox and Huang in 1989. Martingale method allows us to solve the problems of utility maximization in a very elegant manner. However, the Martingale method is not omnipotent. When the market is incomplete, traditional Martingale method will be problematic. To overcome the problem of incompleteness, I. Karatzas, J. P. Lehoczky, S. E. Shreve and G.-L. Xu [SIAM J. Control Optimization 29, No. 3, 702–730 (1991; Zbl 0733.93085)] developed a way to complete the market by introducing additional fictitious stocks and then making them uninteresting to the investor. Nevertheless, to find such fictitious stocks is not straightforward. In particular, when the number of such stocks needed in order to complete the market were very large, it would be very computational, and even may not be possible to be expressed explicitly. To make life easier, we provide an alternative method by directly creating a complete market from the incomplete one such that the dimension of the underlying Brownian motion equals the number of available stocks. Our approach is ready to be used. Cited in 3 Documents MSC: 91B26 Auctions, bargaining, bidding and selling, and other market models Keywords:incomplete market; martingale method; optimal portfolio; continuous time Citations:Zbl 0733.93085 PDF BibTeX XML Cite \textit{A. Zhang}, Appl. Math. Comput. 191, No. 1, 253--262 (2007; Zbl 1193.91060) Full Text: DOI References: [1] Karatzas, I.; Lehoczky, J. P.; Shreve, S. E.; Xu, G. L., Martingale and duality for utility maximization in an incomplete market, SIAM J. Contr. Optim., 29, 702-730 (1991) · Zbl 0733.93085 [2] Korn, R.; Korn, E., Option pricing and portfolio optimization, Graduate Studies in Mathematics, vol. 31 (2000), American Mathematical Society [3] Mas-Colell, A.; Whinston, M. D.; Green, J. R., Microeconomic Theory (1995), Oxford University Press · Zbl 1256.91002 [4] Shreve, S. E., Stochastic Calculus for Finance II: Continuous-time Models (2004), Springer: Springer Berlin · Zbl 1068.91041 This reference list is based on information provided by the publisher or from digital mathematics libraries. Its items are heuristically matched to zbMATH identifiers and may contain data conversion errors. It attempts to reflect the references listed in the original paper as accurately as possible without claiming the completeness or perfect precision of the matching.