In this article, we characterize efficient portfolios, i.e. portfolios which are optimal for at least one rational agent, in a very general multi-currency financial market model with proportional transaction costs. In our setting, transaction costs may be random, time-dependent, have jumps and the preferences of the agents are modeled by multivariate expected utility functions. We provide a complete characterization of efficient portfolios, generalizing earlier results of Dybvig (Rev Financ Stud 1:67-88, 1988) and Jouini and Kallal (J Econ Theory 66: 178-197, 1995). We basically show that a portfolio is efficient if and only if it is cyclically anticomonotonic with respect to at least one consistent price system that prices it. Finally, we introduce the notion of utility price of a given contingent claim as the minimal amount of a given initial portfolio allowing any agent to reach the claim by trading, and give a dual representation of it as the largest proportion of the market price necessary for all agents to reach the same expected utility level.
Efficient portfolios in financial markets with proportional transaction costs / L. Campi, E. Jouini, V. Porte. - In: MATHEMATICS AND FINANCIAL ECONOMICS. - ISSN 1862-9679. - 7:3(2013), pp. 281-304. [10.1007/s11579-013-0099-4]
Efficient portfolios in financial markets with proportional transaction costs
L. Campi;
2013
Abstract
In this article, we characterize efficient portfolios, i.e. portfolios which are optimal for at least one rational agent, in a very general multi-currency financial market model with proportional transaction costs. In our setting, transaction costs may be random, time-dependent, have jumps and the preferences of the agents are modeled by multivariate expected utility functions. We provide a complete characterization of efficient portfolios, generalizing earlier results of Dybvig (Rev Financ Stud 1:67-88, 1988) and Jouini and Kallal (J Econ Theory 66: 178-197, 1995). We basically show that a portfolio is efficient if and only if it is cyclically anticomonotonic with respect to at least one consistent price system that prices it. Finally, we introduce the notion of utility price of a given contingent claim as the minimal amount of a given initial portfolio allowing any agent to reach the claim by trading, and give a dual representation of it as the largest proportion of the market price necessary for all agents to reach the same expected utility level.File | Dimensione | Formato | |
---|---|---|---|
PorteTCrevised8 3.pdf
accesso aperto
Tipologia:
Pre-print (manoscritto inviato all'editore)
Dimensione
420.6 kB
Formato
Adobe PDF
|
420.6 kB | Adobe PDF | Visualizza/Apri |
Campi2013_Article_EquilibriumModelWithDefaultAnd.pdf
accesso riservato
Tipologia:
Publisher's version/PDF
Dimensione
667.46 kB
Formato
Adobe PDF
|
667.46 kB | Adobe PDF | Visualizza/Apri Richiedi una copia |
Pubblicazioni consigliate
I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.