In a simple portfolio choice model of two assets a foreign exchange transactions tax is implemented. We show that the graph in the mu-sigma[square] range is still a parabola and delineate its characteristics for altering tax rates. We presumed a risk avers investor seeking to minimize investment...

International financial markets are said to be excessively volatile due to destabilizing speculation and excessive market volume. Transactions taxes might help. From studying the literature we conclude that there must be an optimal market liquidity, which minimizes excess volatility. There are...