Related papers: Shadow price of information in discrete time stoch…
This paper studies duality and optimality conditions in general convex stochastic optimization problems introduced by Rockafellar and Wets in 1976. We derive an explicit dual problem in terms of two dual variables, one of which is the…
In the paper discrete time shadow price is constructed for the market with several assets with given bid and ask prices. Shadow price is the price such that the problem of optimal utility from terminal wealth on the market without…
Shadow prices are well understood and are widely used in economic applications. However, there are limits to where shadow prices can be applied assuming their natural interpretation and the fact that they reflect the first order optimality…
Shadow prices simplify the derivation of optimal trading strategies in markets with transaction costs by transferring optimization into a more tractable, frictionless market. This paper establishes that a na\"ive shadow price Ansatz for…
A shadow price is a process lying within the bid/ask prices of a market with proportional transaction costs, such that maximizing expected utility from consumption in the frictionless market with this price process leads to the same maximal…
For portfolio optimisation under proportional transaction costs, we provide a duality theory for general cadlag price processes. In this setting, we prove the existence of a dual optimiser as well as a shadow price process in a generalised…
For portfolio choice problems with proportional transaction costs, we discuss whether or not there exists a "shadow price", i.e., a least favorable frictionless market extension leading to the same optimal strategy and utility. By means of…
We propose a method for providing communication network infrastructure in autonomous multi-agent teams. In particular, we consider a set of communication agents that are placed alongside regular agents from the system in order to improve…
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].…
We revisit the optimal investment and consumption model of Davis and Norman (1990) and Shreve and Soner (1994), following a shadow-price approach similar to that of Kallsen and Muhle-Karbe (2010). Making use of the completeness of the model…
We develop inference under model uncertainty due to weak, noisy, multiple candidate restrictions and theories, and nuisance control covariates. A unified framework is given with degrees of misspecification and corresponding shadow prices,…
In a financial market with a continuous price process and proportional transaction costs we investigate the problem of utility maximization of terminal wealth. We give sufficient conditions for the existence of a shadow price process,…
We consider the pricing problem facing a seller of a contingent claim. We assume that this seller has some general level of partial information, and that he is not allowed to sell short in certain assets. This pricing problem, which is our…
For utility maximization problems under proportional transaction costs, it has been observed that the original market with transaction costs can sometimes be replaced by a frictionless "shadow market" that yields the same optimal strategy…
Consider a network design application where we wish to lay down a minimum-cost spanning tree in a given graph; however, we only have stochastic information about the edge costs. To learn the precise cost of any edge, we have to conduct a…
We continue the analysis of our previous paper (Czichowsky/Schachermayer/Yang 2014) pertaining to the existence of a shadow price process for portfolio optimisation under proportional transaction costs. There, we established a positive…
Congestion pricing has received lots of attention in scientific discussion. Congestion pricing means that the operator increases prices at the time of congestion and the traffic demand are expected to decrease. In a certain sense, shadow…
When an investor is faced with the option to purchase additional information regarding an asset price, how much should she pay? To address this question, we solve for the indifference price of information in a setting where a trader…
In frictionless markets, utility maximization problems are typically solved either by stochastic control or by martingale methods. Beginning with the seminal paper of Davis and Norman [Math. Oper. Res. 15 (1990) 676--713], stochastic…
In this paper, we consider a num\'eraire-based utility maximization problem under constant proportional transaction costs and random endowment. Assuming that the agent cannot short sell assets and is endowed with a strictly positive…