Existence of shadow prices in finite probability spaces (Q532533): Difference between revisions
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English | Existence of shadow prices in finite probability spaces |
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Existence of shadow prices in finite probability spaces (English)
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5 May 2011
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This article is concerned with maximizing expected utility from consumption in a finite market model with proportional transaction costs. The authors show that in this market model a shadow price process \(\widetilde{S}\) exists provided \( E\left[\sum u_t(c_t)\right]> -\infty\) , where an optimal portfolio/consumption pair \(\biggl(\left(\phi^0,\phi\right),c \biggr)\) exists for the market with bid/ask prices of \(\underline{S}, \overline{S}\). Moreover, the authors give an analogue of the fundamental theorem of asset pricing.
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transactions costs
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portfolio optimization
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shadow price
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