Equilibrium Interest Rate and Liquidity Premium Under Proportional Transactions
Language: English
Published by Forgotten Books, 2018
- Softcover
- New
Seller: Forgotten Books, London, United KingdomForgotten Books
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Condition: New
US$ 17.85
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Print on Demand. This book examines the impact of transactions costs on asset returns and liquidity premiums in a general equilibrium framework. The author considers a dynamic model where agents face both life cycle and income uncertainty motives for trading. The book analyzes how these costs affect the liquidity premium, which is the difference between the rates of return on illiquid and liquid assets. The findings show that when transactions costs increase, the rate of return on liquid assets decreases, while the rate of return on illiquid assets may increase or decrease. The liquidity premium also increases in this scenario. The effects of transactions costs on both the rate of return on the liquid asset and the liquidity premium, are stronger the higher the fraction of the illiquid assets in the economy. This book is a reproduction of an important historical work, digitally reconstructed using state-of-the-art technology to preserve the original format. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in the book.…
Seller Inventory # 9781332245437_0
- Title
- Equilibrium Interest Rate and Liquidity Premium Under Proportional Transactions
- Author
- Dimitri Vayanos, Jean-Luc Vila
- Publisher
- Forgotten Books
- Publication year
- 2018
- Condition
- New
- Book Type
- print-on-demand item
- Binding
- Paperback
- Language
- English
- ISBN 10
- 1332245439
- ISBN 13
- 9781332245437
- Seller catalogs
- Economics
Exploring how transaction costs reshape asset returns and liquidity in a tractable over time framework.
In this study, the author develops a general equilibrium model with two assets—a liquid one traded without costs and an illiquid one with proportional costs—to understand why liquidity matters for prices and how the liquidity premium emerges. The analysis highlights how market frictions can move returns, influence saving behavior, and affect the demand for different assets over a lifetime.
- See how liquidity differences translate into observable return differences between liquid and illiquid assets.
- Learn how changes in transaction costs drive wealth effects and substitution effects across a life-cycle economy.
- Understand why the liquidity premium can rise with the share of illiquid assets in the economy and how this shapes overall asset demand.
- Grasp the qualitative implications for asset pricing and the role of market frictions in models beyond frictionless assumptions.
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Forgotten Books
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Forgotten Books’ Classic Reprint Series utilizes the latest technology to regenerate facsimiles of historically important writings. Careful attention has been made to accurately preserve the original format of each page whilst digitally enhancing the quality of the aged text.
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