Related papers: Shadow prices for continuous processes
A market model with $d$ assets in discrete time is considered where trades are subject to proportional transaction costs given via bid-ask spreads, while the existence of a num\`eraire is not assumed. It is shown that robust no arbitrage…
We study a continuous-time financial market with continuous price processes under model uncertainty, modeled via a family $\mathcal{P}$ of possible physical measures. A robust notion ${\rm NA}_{1}(\mathcal{P})$ of no-arbitrage of the first…
In this note we consider the maximization of the expected terminal wealth for the setup of quadratic transaction costs. First, we provide a very simple probabilistic solution to the problem. Although the problem was largely studied, as far…
We study the two-times differentiability of the value functions of the primal and dual optimization problems that appear in the setting of expected utility maximization in incomplete markets. We also study the differentiability of the…
Two major financial market complexities are transaction costs and uncertain volatility, and we analyze their joint impact on the problem of portfolio optimization. When volatility is constant, the transaction costs optimal investment…
I study the limit of a large random economy, where a set of consumers invests in financial instruments engineered by banks, in order to optimize their future consumption. This exercise shows that, even in the ideal case of perfect…
In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage…
We investigate the general structure of optimal investment and consumption with small proportional transaction costs. For a safe asset and a risky asset with general continuous dynamics, traded with random and time-varying but small…
We consider an Ito-financial market at which the risky assets' returns are derived endogenously through a market-clearing condition amongst heterogeneous risk-averse investors with quadratic preferences and random endowments. Investors act…
We study the expected utility maximization problem of a large investor who is allowed to make transactions on tradable assets in an incomplete financial market with endogenous permanent market impacts. The asset prices are assumed to follow…
We consider a one-period Kyle (1985) framework where the insider can be subject to a penalty if she trades. We establish existence and uniqueness of equilibrium for virtually any penalty function when noise is uniform. In equilibrium, the…
We consider portfolio selection under nonparametric $\alpha$-maxmin ambiguity in the neighbourhood of a reference distribution. We show strict concavity of the portfolio problem under ambiguity aversion. Implied demand functions are…
A new definition of events of game-theoretic probability zero in continuous time is proposed and used to prove results suggesting that trading in financial markets results in the emergence of properties usually associated with randomness.…
This paper formulates a model of utility for a continuous time framework that captures the decision-maker's concern with ambiguity about both volatility and drift. Corresponding extensions of some basic results in asset pricing theory are…
The classical discrete time model of proportional transaction costs relies on the assumption that a feasible portfolio process has solvent increments at each step. We extend this setting in two directions, allowing for convex transaction…
We propose a continuous time model for financial markets with proportional transactions costs and a continuum of risky assets. This is motivated by bond markets in which the continuum of assets corresponds to the continuum of possible…
To study the assumption that the utility maximization hypothesis implicitly adds to consumer theory, we consider a mathematical representation of pre-marginal revolution consumer theory based on subjective exchange ratios. We introduce two…
We consider a general discrete-time financial market with proportional transaction costs as in [Kabanov, Stricker and R\'{a}sonyi Finance and Stochastics 7 (2003) 403--411] and [Schachermayer Math. Finance 14 (2004) 19--48]. In addition to…
In the large financial market, which is described by a model with countably many traded assets, we formulate the problem of the expected utility maximization. Assuming that the preferences of an economic agent are modeled with a stochastic…
In the frictionless discrete time financial market of Bouchard et al.(2015) we consider a trader who, due to regulatory requirements or internal risk management reasons, is required to hedge a claim $\xi$ in a risk-conservative way relative…