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- Title
Existence of shadow prices in finite probability spaces.
- Authors
Kallsen, Jan; Muhle-Karbe, Johannes
- Abstract
shadow price is a process $${\widetilde{S}}$$ lying within the bid/ask prices $${\underline{S},\overline{S}}$$ of a market with proportional transaction costs, such that maximizing expected utility from consumption in the frictionless market with price process $${\widetilde{S}}$$ leads to the same maximal utility as in the original market with transaction costs. For finite probability spaces, this note provides an elementary proof for the existence of such a shadow price.
- Subjects
SHADOW prices; BID price; ASKED price; TRANSACTION costs; UTILITY theory; CONSUMPTION (Economics); INVESTMENTS
- Publication
Mathematical Methods of Operations Research, 2011, Vol 73, Issue 2, p251
- ISSN
1432-2994
- Publication type
Article
- DOI
10.1007/s00186-011-0345-6