Transaction Costs and Shadow Prices in Discrete Time

Abstract

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 an explicit counter-example, we show that shadow prices may fail to exist even in seemingly perfectly benign situations… (More)

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Cite this paper

@inproceedings{Czichowsky2013TransactionCA, title={Transaction Costs and Shadow Prices in Discrete Time}, author={Christoph Czichowsky and Johannes Muhle-Karbe and Walter Schachermayer}, year={2013} }