The usual notion of every future cash stream having a net present value determined from a single term structure breaks down when transaction costs are taken into account, especially the sizable costs associated with short-borrowing. the difficulties are compounded by taxes, which can lead to...

The value of a future cash stream is often taken to be its net present value with respect to some term structure. This means that a linear formula is used in which each future payment is discounted by a factor deemed appropriate for the date on which the payment will be made. In a money market...