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**W. Schachermayer**

Annals of Applied Probability, Vol. 11 (2001), No. 3, pp. 694-734.

This paper accompanies a previous one from 1999 by D. Kramkov and the present author. There, we considered utility functions $U:\R_+ \to \R$ satisfying the Inada conditions $U'(0)=\infty$ and $U'(\infty)=0$, in the present paper we consider utility functions $U:\R\to\R$ which are finitely valued, for all $x\inftyn\R$, and satisfy $U'(-\infty)=\infty$ and $U'(\infty)=0$. A typical example of this situation is the exponential utility $U(x)=- \e^{-x}$.

In the setting of the former paper the following crucial condition on the asymptotic elasticity of $U$, as $x$ tends to $+\infty$, was isolated: $\limsup_{x\to +\infty} \frac{x U'(x)}{U(x)}<1$. This condition was found to be necessary and sufficient for the existence of the optimal investment as well as other key assertions of the related duality theory to hold true, if we allow for general semi-martingales to model a (not necessarily complete) financial market.

In the setting of the present paper this condition has to be
accompanied by a similar condition on the asymptotic elasticity of $U$, as
$x$ tends to $-\infty$, namely, $\liminf_{x\to-\infty} \frac{x
U'(x)}{U(x)}>1$. If both conditions are satisfied --- we then say that
the utility function $U$ has *reasonable asymptotic elasticity* ---
we prove an existence theorem for the optimal investment in a general
semi-martingale model of a financial market and for a utility function
$U:\R\to\R$ , which is finitely valued on all of $\R$; this theorem is
parallel to the main result of the former paper. We give examples showing
that the reasonable asymptotic elasticity of $U$ also is a necessary
condition for several key assertions of the theory to hold true.

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