On the dual of the solvency cone

DOI10.1016/J.DAM.2015.01.030zbMATH Open1330.91177arXiv1402.2221OpenAlexW1969754571MaRDI QIDQ2345609FDOQ2345609

Authors: Andreas Löhne, Birgit Rudloff 

Publication date: 22 May 2015

Published in: Discrete Applied Mathematics (Search for Journal in Brave)

Abstract: A solvency cone is a polyhedral convex cone which is used in Mathematical Finance to model proportional transaction costs. It consists of those portfolios which can be traded into nonnegative positions. In this note, we provide a characterization of its dual cone in terms of extreme directions and discuss some consequences, among them: (i) an algorithm to construct extreme directions of the dual cone when a corresponding "contribution scheme" is given; (ii) estimates for the number of extreme directions; (iii) an explicit representation of the dual cone for special cases. The validation of the algorithm is based on the following easy-to-state but difficult-to-solve result on bipartite graphs: Running over all spanning trees of a bipartite graph, the number of left degree sequences equals the number of right degree sequences.

Full work available at URL: https://arxiv.org/abs/1402.2221

Recommendations

• Duality and its applications to optimality conditions with nonsolid cones
• scientific article; zbMATH DE number 5039810
• Convex duality and financial mathematics
• Duality in a Problem of Static Partial Hedging under Convex Constraints
• Risk and Utility in the Duality Framework of Convex Analysis
• Conjugate duality in problems of constrained utility maximization
• scientific article; zbMATH DE number 1263727
• Characterizations for solidness of dual cones with applications
• On duality theory of convex semi-infinite programming
• On the duality operator of a convex cone

zbMATH Keywords

bipartite graphtransaction costsspanning treedual coneextreme directionflow in graph

Mathematics Subject Classification ID

Applications of graph theory (05C90) Polyhedral combinatorics, branch-and-bound, branch-and-cut (90C57) Portfolio theory (91G10) Flows in graphs (05C21) Inequalities and extremum problems involving convexity in convex geometry (52A40)

Cites Work

• Explicit solution to the multivariate super-replication problem under transaction costs.
• The Fundamental Theorem of Asset Pricing under Proportional Transaction Costs in Finite Discrete Time
• Markets with transaction costs. Mathematical theory.
• Hedging and liquidation under transaction costs in currency markets
• Permutohedra, Associahedra, and Beyond
• Title not available (Why is that?)
• Digraphs. Theory, algorithms and applications
• State Constraints in Convex Control Problems of Bolza
• New Methods in Mathematical Programming—Optimal Flow Through Networks with Gains

Cited In (1)

• Equivalence between polyhedral projection, multiple objective linear programming and vector linear programming

This page was built for publication: On the dual of the solvency cone

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q2345609)