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<p>We construct a discrete-time shadow price for a market with multiple assets and transaction costs, represented by bid and ask prices. A shadow price is a price process such that the optimal utility of terminal wealth in a corresponding frictionless market coincides with that in the original market with transaction costs. Our solution proceeds in three steps: first, we solve the static problem for two assets; second, we extend this to construct a shadow price for a dynamic model; and finally, we generalize the construction to the case of multiple assets.</p>

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Discrete-Time Shadow Price Revisited

  • 期刊论文

  • 出版模式：

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  • 发表日期：

    2026年6月2日

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  • Tomasz Rogala,
  • Ł.ukasz Stettner

摘要

We construct a discrete-time shadow price for a market with multiple assets and transaction costs, represented by bid and ask prices. A shadow price is a price process such that the optimal utility of terminal wealth in a corresponding frictionless market coincides with that in the original market with transaction costs. Our solution proceeds in three steps: first, we solve the static problem for two assets; second, we extend this to construct a shadow price for a dynamic model; and finally, we generalize the construction to the case of multiple assets.