Martingale Measure Method for Expected Utility
Maximization in Discrete-Time Incomplete Markets

Ping Li

In this paper we study the expected utility maximization problem for discrete-time incomplete financial markets. As shown by Xia and Yan (2000a, 2000b) in the continuous-time case, this problem can be solved by the martingale measure method. In a special discrete-time model, we explicitly work out the optimal trading strategies and the associated minimum relative entropy martingale measures and minimum Hellinger-Kakutani distance martingale measures.