A shadow price is a process <InlineEquation ID="IEq1"> <EquationSource Format="TEX">$${\widetilde{S}}$$</EquationSource> </InlineEquation> lying within the bid/ask prices <InlineEquation ID="IEq2"> <EquationSource Format="TEX">$${\underline{S},\overline{S}}$$</EquationSource> </InlineEquation> of a market with proportional transaction costs, such that maximizing expected utility from consumption in the frictionless market with price process <InlineEquation ID="IEq3"> <EquationSource Format="TEX">$${\widetilde{S}}$$</EquationSource> </InlineEquation> leads...</equationsource></inlineequation></equationsource></inlineequation></equationsource></inlineequation>

We consider the classical problem of maximizing expected utility from terminal wealth. With the help of a martingale criterion explicit solutions are derived for power utility in a number of affine stochastic volatility models.

A shadow price is a process $${\widetilde{S}}$$ lying within the bid/ask prices $${\underline{S},\overline{S}}$$ of a market with proportional transaction costs, such that maximizing expected utility from consumption in the frictionless market with price process $${\widetilde{S}}$$ leads to the...

In this paper we introduce the notion of portfolio optimization by maximizing expected local utility. This concept is related to maximization of expected utility of consumption but, contrary to this common approach, the discounted financial gains are consumed immediately. In a general...

In this paper we introduce the notion of portfolio optimization by maximizing expected local utility. This concept is related to maximization of expected utility of consumption but, contrary to this common approach, the discounted financial gains are consumed immediately. In a general...