Abstract
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].
Similar to Kallsen and Muhle-Karbe [ Ann. Appl. Probab. 20 (2010) 1341–1358], we derive a shadow price, that is, a frictionless price process with values in the bid-ask spread which leads to the same optimal policy.
Citation
Attila Herczegh. Vilmos Prokaj. "Shadow price in the power utility case." Ann. Appl. Probab. 25 (5) 2671 - 2707, October 2015. https://doi.org/10.1214/14-AAP1058
Information
