Abstract For any utility function with asymptotic elasticity equal to one, we construct a market model in countable discrete time, such that the utility maximization problem with proportional transaction costs admits no solution. This proves that the necessity of the reasonable asymptotic...

Ratios that indicate the statistical significance of a fund's alpha typically appraise its performance. A growing literature suggests that even in the absence of any ability to predict returns, holding options positions on the benchmark assets or trading frequently can significantly enhance...

For an investor with constant absolute risk aversion and a long horizon, who trades in amarket with constant investment opportunities and small proportional transaction costs, weobtain explicitly the optimal investment policy, its implied welfare, liquidity premium, andtrading volume. We...

In a market with one safe and one risky asset, an investor with a long horizon, constantinvestment opportunities, and constant relative risk aversion trades with small proportionaltransaction costs. We derive explicit formulas for the optimal investment policy, its impliedwelfare, liquidity...

Ratios that indicate the statistical significance of a fund’s alpha typically appraise its performance. A growing literature suggests that even in the absence of any ability to predict returns, holding options positions on the benchmark assets or trading frequently can significantly enhance...