We study the behavior of the optimal portfolio policy of a long-run investor in markets with stationary investment opportunity sets. We provide conditions on the utility function, for large wealth levels, which are sufficient for the optimal portfolio policy to approximate, as the trading...

A restriction to nonnegative wealth is sufficient to preclude all arbitrage opportunities in financial models that have risk neutral probabilities that are valid for all simple strategies. Imposing nonnegative wealth does not constrain agents from making the choice they would make under the...

The market for Treasury securities attracted considerable attention recently, after alleged infringements by Salomon Brothers. Several questions have been raised about the best way of selling U.S. government debt. One issue is whether altering the auction format would yield greater revenues for...

A model of optimal consumption and portfolio choice that captures the notions of local substitution and irreversible purchases of durable goods is studied. Necessary and sufficient conditions for a consumption and portfolio policy to be optimal are provided. A closed-form solution of the optimal...

This paper provides sufficient conditions for the equilibrium price system and a vector of exogenously specified state variable processes to form a diffusion process in a pure exchange economy. The conditions involve smoothness of agents' utility functions and certain nice properties of the...

A necessary and sufficient condition for linear sharing rules to be Pareto optimal, as generally accepted by the finance community, is that utility functions be of the equicautious HARA class. We demonstrate that this condition is not necessary for a fixed distribution of initial endowments and...