Term Structure Multiplicity and Clientele in Markets with Transactions Costs and Taxes
AbstractThe 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 transactions costs shows that this multipli city can induce a valuation range of over 277 basis points. Transacti ons costs also allow equilibrium without short-sale restrictions. The authors find the minimum transactions costs that prevent arbitrage. Each investor is shown to have a new type of clientele effect, called a weak long or a weak short clientele effect, for each bond. Copyright 1988 by American Finance Association.
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Bibliographic InfoArticle provided by American Finance Association in its journal Journal of Finance.
Volume (Year): 43 (1988)
Issue (Month): 4 (September)
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- Ioannides, Michalis, 2003. "A comparison of yield curve estimation techniques using UK data," Journal of Banking & Finance, Elsevier, vol. 27(1), pages 1-26, January.
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