2018/05/16 by Shuoqing Deng, Deng, Shuoqing, Xiaolu Tan +3
Decision Sciences · Economics, Econometrics and Finance · #Decision-Making and Behavioral Economics #Economic theories and models #FOS: Economics and business #FOS: Mathematics #Mathematical Finance (q-fin.MF) #Optimization and Control (math.OC) #Risk and Portfolio Optimization
paper · pdf · doi:10.48550/arxiv.1805.06498
openalex publication_date 2018/05/16 · openalex created_date 2021/02/01 · openalex updated_date 2026/07/28
We consider a discrete time financial market with proportional transaction\ncosts under model uncertainty, and study a num 'eraire-based semi-static\nutility maximization problem with an exponential utility preference. The\nrandomization techniques recently developed in citeBDT17 allow us to\ntransform the original problem into a frictionless counterpart on an enlarged\nspace. By suggesting a different dynamic programming argument than in\n citebartl2016exponential, we are able to prove the existence of the optimal\nstrategy and the convex duality theorem in our context with transaction costs.\nIn the frictionless framework, this alternative dynamic programming argument\nalso allows us to generalize the main results in citebartl2016exponential to\na weaker market condition. Moreover, as an application of the duality\nrepresentation, some basic features of utility indifference prices are\ninvestigated in our robust setting with transaction costs.\n