Past exam of the mathematics course of the University of Cambridge / 2019 / iii / Paper 211 / 1 / b / Solution

Let $(h_k)$ be a bounded minimizing sequence. A subsequence converges to some $h_{\ast }$, and continuity gives $F(h_{\ast })=f$. Since $F$ is smooth and $h_{\ast }$ is an unconstrained minimizer,DefineThen $\rho >0$, $\mathbb{E}\rho =1$, andThus the normalized exponential tilt is the required state-price density.