Dynamic Imperfect Market Models

Anna Nagurney and Stavros Siokos
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Anna Nagurney: University of Massachusetts
Stavros Siokos: University of Massachusetts

Chapter 10 in Financial Networks, 1997, pp 278-294 from Springer

Abstract: 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.

Keywords: Utility Function; Transaction Cost; Portfolio Selection; Euler Method; Market Imperfection (search for similar items in EconPapers)
Date: 1997
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DOI: 10.1007/978-3-642-59066-5_10

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