A Dynamic Model of the Liquidity Premium.

We compute the optimal investment-consumption policy for an agent that is able to invest upon two non-risky assets, one liquid and the other illiquid -which means that transaction costs have to be paid when he buys or sells this last asset. An equilibrium model then gives us a way to compute the equilibrium values of the returns. Finally, we investigate the special case where the agents all have Constant Relative Risk Aversion utility functions.

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Year of publication:	1996
Authors:	Koehl, P.F.
Subject:	MATHEMATICS \| RISK \| GENERAL EQUILIBRIUM \| LIQUIDITY

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Type of publication:	Book / Working Paper
Notes:	25 pages
Classification:	D80 - Information and Uncertainty. General ; D81 - Criteria for Decision-Making under Risk and Uncertainty ; G10 - General Financial Markets. General ; G11 - Portfolio Choice
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005640982