Existence of Shadow Prices in Finite Probability Spaces

Details Existence of Shadow Prices in Finite Probability Spaces Existence of Shadow Prices in Finite Probability Spaces

2009-11-25

arxiv.org/abs/0911.4801v2

Economy

Quantitative Finance

Portfolio Management

11 pages

Scientific paper

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 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.

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