Utility maximization problem under transaction costs: optimal dual processes and stability

Lingqi Gu, Yiqing Lin and Junjian Yang

Papers from arXiv.org

Abstract: This paper discusses the num\'eraire-based utility maximization problem in markets with proportional transaction costs. In particular, the investor is required to liquidate all her position in stock at the terminal time. We first observe the stability of the primal and dual value functions as well as the convergence of the primal and dual optimizers when perturbations occur on the utility function and on the physical probability. We then study the properties of the optimal dual process (ODP), that is, a process from the dual domain that induces the optimality of the dual problem. When the market is driven by a continuous process, we construct the ODP for the problem in the limiting market by a sequence of ODPs corresponding to the problems with small misspecificated parameters. Moreover, we prove that this limiting ODP defines a shadow price.

Date: 2017-10
New Economics Papers: this item is included in nep-cta and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/1710.04363 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: https://EconPapers.repec.org/RePEc:arx:papers:1710.04363

Access Statistics for this paper

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