Related papers: Shadow prices for continuous processes
An investor with constant relative risk aversion trades a safe and several risky assets with constant investment opportunities. For a small fixed transaction cost, levied on each trade regardless of its size, we explicitly determine the…
We consider two risk-averse financial agents who negotiate the price of an illiquid indivisible contingent claim in an incomplete semimartingale market environment. Under the assumption that the agents are exponential utility maximizers…
Over the past few years, the futures market has been successfully developing in the North-West region. Futures markets are one of the most effective and liquid-visible trading mechanisms. A large number of buyers are forced to compete with…
In this paper, asymptotic results in a long-term growth rate portfolio optimization model under both fixed and proportional transaction costs are obtained. More precisely, the convergence of the model when the fixed costs tend to zero is…
This paper studies the equilibrium price of an asset that is traded in continuous time between N agents who have heterogeneous beliefs about the state process underlying the asset's payoff. We propose a tractable model where agents maximize…
In this article, we consider the problem of equilibrium price formation in an incomplete securities market consisting of one major financial firm and a large number of minor firms. They carry out continuous trading via the securities…
We investigate the dynamic stability of the indirect utility process associated with a (possibly suboptimal) trading strategy under perturbations of the market. Establishing the reverse conjugacy characterizations first, we prove continuity…
We reconsider the problem of optimal trading in the presence of linear and quadratic costs, for arbitrary linear costs but in the limit where quadratic costs are small. Using matched asymptotic expansion techniques, we find that the trading…
Sequential auctions for identical items with unit-demand, private-value buyers are common and often occur periodically without end, as new bidders replace departing ones. We model bidder uncertainty by introducing a probability that a…
Platform giants in China have operated with persistently compressed margins in highly concentrated markets for much of the past decade, despite market shares exceeding 60\% in core segments. Standard theory predicts otherwise: either the…
The Merton investment-consumption problem is fundamental, both in the field of finance, and in stochastic control. An important extension of the problem adds transaction costs, which is highly relevant from a financial perspective but also…
A financial market comprising of a certain number of distinct companies is considered, and the following statement is proved: either a specific agent will surely beat the whole market unconditionally in the long run, or (and this "or" is…
We obtain an exact necessary and sufficient condition for the existence and uniqueness of equilibrium asset prices in infinite horizon, discrete-time, arbitrage free environments. Through several applications we show how the condition…
The problem of robust utility maximization in an incomplete market with volatility uncertainty is considered, in the sense that the volatility of the market is only assumed to lie between two given bounds. The set of all possible models…
We consider an agent who invests in a stock and a money market account with the goal of maximizing the utility of his investment at the final time T in the presence of a proportional transaction cost. The utility function considered is…
This paper studies the properties of the optimal portfolio-consumption strategies in a {finite horizon} robust utility maximization framework with different borrowing and lending rates. In particular, we allow for constraints on both…
This paper examines an optimal investment problem in a continuous-time (essentially) complete financial market with a finite horizon. We deal with an investor who behaves consistently with principles of Cumulative Prospect Theory, and whose…
The present article provides a novel theoretical way to evaluate tradeability in markets of ordinary exponential L\'evy type. We consider non-tradeability as a particular type of market illiquidity and investigate its impact on the price of…
We investigate the possibility of completing financial markets in a model with no exogenous probability measure and market imperfections. A necessary and sufficient condition is obtained for such extension to be possible.
We consider a multi-stock continuous time incomplete market model with random coefficients. We study the investment problem in the class of strategies which do not use direct observations of the appreciation rates of the stocks, but rather…