Abstract
A large portion of financial theory and modeling neglects the presence of imperfections in financial markets. This is something that one would expect since the inclusion of market imperfections significantly increases the complexity of any model, and qualitatively alters the problem under consideration. The sources for such imperfections are directly connected with the nature of financial trading, and they appear as transaction costs, taxes, and/or price policy interventions. The presence of practically any friction in the market can dramatically change the type of financial modeling that is needed. Nevertheless, practice suggests that imperfections are a source of concern for all participants in the market, and, consequently, realistic models that can incorporate them are needed.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Constantinides, G. M., “Multiperiod Consumption and Investment Behavior with Convex Transaction Costs,” Management Science 25 (1979) 1127–1137
Constantinides, G. M., “Capital Market Equilibrium with Transaction Costs,” Journal of Political Economy 94 (1986) 842–862
Davis, M. H. A., and Norman, A., “Portfolio Selection with Transaction Costs,” Mathematics of Operations Research 15 (1990) 676–713
Dong, J., “Dynamic Model and Stability Analysis of General Financial Equilibrium with Policy Interventions,” presented at the Second International Conference on Computing in Economics and Finance, Geneva, Switzerland, June 1996
Dong, J., Zhang, D., and Nagurney, A., “A Projected Dynamical Systems Model of General Financial Equilibrium with Stability Analysis,” Mathematical and Computer Modelling 24 (1996) 35–44
Duffie, D., and Sun, T., “Transaction Costs and Portfolio Choice in a DiscreteContinuous-Time Setting,” Journal of Economic Dynamics and Control 14 (1990) 35–51
Dumas, B., and Luciano, E., “An Exact Solution to a Dynamic Portfolio Choice Problem under Transaction Costs,” The Journal of Finance 46 (1991) 577–595
Dupuis, P., and Nagurney, A., “Dynamical Systems and Variational Inequalities,” Annals of Operations Research 44 (1993) 9–42
Magill, M. J. P., and Constantinides, G. M., “Portfolio Selection with Transaction Costs,” Journal of Economic Theory 13 (1976) 245–263
Merton, R. C., “Lifetime Portfolio Selection Under Uncertainty: The Continuous-Time Case,” Review of Economic Statistics 51 (1969) 247–257
Merton, R. C., “Optimum Consumption and Portfolio Rules in a Continuous-Time Case,” Journal of Economic Theory 3 (1971) 373–413
Merton, R. C., “An Intertemporal Capital Asset Pricing Model,” Econometrica 41 (1973) 867–887
Nagurney, A., and Dong, J., “General Financial Equilibrium Modeling with Policy Interventions and Transaction Costs,” Computational Economics 9 (1996) 3–17
Nagurney, A., and Zhang, D., Projected Dynamical Systems and Variational Inequalities with Applications,Kluwer Academic Publishers, Boston, Massachusetts, 1996
Shreve, S. E., and Soner H. M., “Optimal Investment and Consumption with Transaction Costs,” The Annals of Applied Probability 4 (1994) 609–692
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 1997 Springer-Verlag Berlin Heidelberg
About this chapter
Cite this chapter
Nagurney, A., Siokos, S. (1997). Dynamic Imperfect Market Models. In: Financial Networks. Advances in Spatial Science. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-59066-5_10
Download citation
DOI: https://doi.org/10.1007/978-3-642-59066-5_10
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-642-63835-0
Online ISBN: 978-3-642-59066-5
eBook Packages: Springer Book Archive