Robust no arbitrage and the solvability of vector-valued utility maximization problems

Abstract

A market model with $d$ assets in discrete time is considered where trades are subject to proportional transaction costs given via bid-ask spreads, while the existence of a numèraire is not assumed. It is shown that robust no arbitrage holds if, and only if, there exists a Pareto solution for some vector-valued utility maximization problem with component-wise utility functions. Moreover, it is demonstrated that a consistent price process can be constructed from the Pareto maximizer.

9 pages