The Library
Equilibrium asset pricing with transaction costs
Tools
Tools
Tools
Herdegen, Martin, Muhle-Karbe, J. and Possamaï, D. (2021) Equilibrium asset pricing with transaction costs. Finance and Stochastics, 25 . pp. 231-275. doi:10.1007/s00780-021-00449-4 ISSN 0949-2984.
|
PDF
WRAP-equilbrium-asset-pricing-transaction-costs-Herdegen-2020.pdf - Published Version - Requires a PDF viewer. Available under License Creative Commons Attribution 4.0. Download (1143Kb) | Preview |
|
![[img]](http://wrap.warwick.ac.uk/style/images/fileicons/application_pdf.png) |
PDF
WRAP-equilbrium-asset-pricing-transaction-costs-Herdegen-2020.pdf - Accepted Version Embargoed item. Restricted access to Repository staff only - Requires a PDF viewer. Download (1242Kb) |
Official URL: https://doi.org/10.1007/s00780-021-00449-4
Abstract
We study risk-sharing economies where heterogeneous agents trade subject to quadratic transaction costs. The corresponding equilibrium asset prices and trading strategies are characterised by a system of nonlinear, fully coupled forward–backward stochastic differential equations. We show that a unique solution exists provided that the agents’ preferences are sufficiently similar. In a benchmark specification with linear state dynamics, the empirically observed illiquidity discounts and liquidity premia correspond to a positive relationship between transaction costs and volatility.
| Item Type: | Journal Article | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HG Finance |
||||||||
| Divisions: | Faculty of Science, Engineering and Medicine > Science > Statistics | ||||||||
| Library of Congress Subject Headings (LCSH): | Equilibrium (Economics) -- Mathematical models, Capital assets pricing model, Transaction costs -- Mathematical models | ||||||||
| Journal or Publication Title: | Finance and Stochastics | ||||||||
| Publisher: | Springer | ||||||||
| ISSN: | 0949-2984 | ||||||||
| Official Date: | April 2021 | ||||||||
| Dates: |
|
||||||||
| Volume: | 25 | ||||||||
| Page Range: | pp. 231-275 | ||||||||
| DOI: | 10.1007/s00780-021-00449-4 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Access rights to Published version: | Open Access (Creative Commons) | ||||||||
| Date of first compliant deposit: | 30 November 2020 | ||||||||
| Date of first compliant Open Access: | 10 March 2021 | ||||||||
| RIOXX Funder/Project Grant: |
|
||||||||
| Related URLs: | |||||||||
| Open Access Version: |
Request changes or add full text files to a record
Repository staff actions (login required)
 |
View Item |
Downloads
Downloads per month over past year
