Economics at your fingertips  

Shadow price in the power utility case

Attila Herczegh and Vilmos Prokaj

Papers from

Abstract: We consider the problem of maximizing expected power utility from consumption over an infinite horizon in the Black-Scholes model with proportional transaction costs, as studied in Shreve and Soner [Ann. Appl. Probab. 4 (1994) 609-692]. Similar to Kallsen and Muhle-Karbe [Ann. Appl. Probab. 20 (2010) 1341-1358], we derive a shadow price, that is, a frictionless price process with values in the bid-ask spread which leads to the same optimal policy.

Date: 2011-12, Revised 2015-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10) Track citations by RSS feed

Published in Annals of Applied Probability 2015, Vol. 25, No. 5, 2671-2707

Downloads: (external link) Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in Papers from
Bibliographic data for series maintained by arXiv administrators ().

Page updated 2022-06-04
Handle: RePEc:arx:papers:1112.4385