Empirical immunization studies have considered the efficacy of immunization strategies in which the durations of assets and of liabilities are equated against a strategy involving maturity matching. However all these studies have ignored tax effects. In the presence of tax-clientele effects...

Tax-clientele effects induce segmented equilibria and these affect the estimation of the term structure of interest rates. The identification of these effects depends on the deviations of bond prices from the value of their discounted cash flows. However, bond prices contain noise that makes it...

Masulis and Trueman (1988) investigated corporate investment and dividend decisions under differential personal taxation. They assumed a state-preference complete market, a ban on short selling and concluded that shareholders prefer nonzero dividend payment. In their model, the restrictions on...

This paper develops an analytical model that describes how to construct a hedging portfolio that takes into account the adverse tax treatment of derivative securities so that a position is fully hedged on an after-tax basis regardless of the tax treatment. A pre-tax hedge, under the presumption...

The authors investigate term structure with realistic transactions costs and taxes. Its properties are derived from a certain no- arbitrage condition via duality theory in convex programming. Transac tions costs imply an infinite multiplicity of term structures. A simp le example with realistic...

One of the most fundamental results in finance is the equivalence of a no-arbitrage condition to the existence of a pricing operator in markets without transaction costs (see Ross (1978)). Garman and Ohlson (1981) extended this to markets with proportional transaction costs. The current paper...

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...