The book is the first monograph on this highly important subject.

The book is the first monograph on this highly important subject.

The central mathematical concept in the theory of frictionless markets is a martingale measure. In this, the first monograph devoted to the theory of financial markets with transaction costs, the authors argue that, for financial markets with proportional transaction costs, this concept should be replaced by that of the consistent price system, which is a martingale evolving in the duals to the solvency cones. Three main subjects are considered: 1. The Leland approach to the hedging of contingent claims based on approximate replication. 2. Arbitrage theory for markets with proportional transaction costs based on a geometric approach. 3. The consumption-investment problem analyzed using viscosity solutions of the Hamilton-Jacobi-Bellman equation. The first part contains recent findings on hedging errors and limit theorems for Leland-type strategies. The rigorous mathematical analysis presented in the book is designed to serve as a platform for further studies. The second part includes a chapter on the arbitrage theory for frictionless markets in discrete time. It is presented as an introduction to the theory of markets with transaction costs, but can also be read independently. The main subjects of the second part are no-arbitrage criteria and hedging theorems for European and American options under transaction costs. In contrast to the classical theory, the value processes are vector-valued and the concept of the martingale measure is replaced by the concept of the consistent price system. Hedging theorems give dual descriptions of the set of initial endowments needed to super-replicate contingent claims. These descriptions are expressed in terms of consistent price systems. This volume provides a detailed study of various new phenomena arising in the presence of market friction in discrete and continuous time. The mathematics needed is a synthesis of ideas from finite-dimensional geometry, geometric functional analysis, and general theory of stochastic processes. The third part deals with the optimal control of portfolios in the presence of market friction using the geometric approach developed in the second part. It contains a study of viscosity solutions of a multidimensional HJB equation. Special attention is paid to the two-asset model, for which the structure of optimal control is described, together with findings on the asymptotic behavior of solutions for vanishing transaction costs. The appendix provides a toolbox containing auxiliary results from various branches of mathematics used in the book.

All organizations, institutions, business processes, markets and strategies have one aim in common: the reduction of transaction costs. This aim is pursued relentlessly in practice, and has been perceived to bring about drastic changes, especially in the recent global market and the cyber economy. This book analyzes and describes “transactions” as a model, on the basis of which organizations, institutions and business processes can be appropriately shaped. It tracks transaction costs to enable a scientific approach instead of a widely used “state-of-the-art” approach, working to bridge the gap between theory and practice. This open access book analyzes and describes “transactions” as a model...

Transaction cost economics began to take shape around 1970 and has since been established as an essential tool used to illuminate a wide range of problems in economics and other social sciences. This reader presents articles which together form the foundations of research in transaction cost economics.

Munger predicts that smartphones will allow the 'transactions cost economy' to commodify excess capacity, promoting sharing instead of owning.m

Transaction cost economics has and continues to be a fruitful area of research. There is still much to be done in the field with past research being used in conjunction with the vast number of contractual phenomena that have yet to be investigated in transaction cost economics terms. New challenges are posed by the need to move beyond the design of new contractual instruments (such as financial derivatives) to include an examination of the lurking hazards that attend contract implementation.

The theoretical foundations of management strategy are identified and outlined in this text. Five theories are considered in the light of questions about how organisations operate efficiently, cost minimization, wealth creation, individual self-interest, and continued growth.

Agency Theory is a new branch of economics which focusses on the roles of information and of incentives when individuals cooperate with respect to the utilisation of resources. Basic approaches are coming from microeco nomic theory as well as from risk analysis. Among the broad variety of ap plications are: the many designs of contractual arrangements, organiza tions, and institutions as well as the manifold aspects of the separation of ownership and control so fundamental for business finance. After some twenty years of intensive research in the field of information economics it might be timely to present the most basic issues, questions, models, and applications. This volume Agency Theory, Information, and Incentives offers introductory surveys as well as results of individual rese arch that seem to shape that field of information economics appropriately. Some 30 authors were invited to present their subjects in such a way that students could easily become acquainted with the main ideas of informa tion economics. So the aim of Agency Theory, Information, and Incentives is to introduce students at an intermediate level and to accompany their work in classes on microeconomics, information economics, organization, management theory, and business finance. The topics selected form the eight sections of the book: 1. Agency Theory and Risk Sharing 2. Information and Incentives 3. Capital Markets and Moral Hazard 4. Financial Contracting and Dividends 5. External Accounting and Auditing 6. Coordination in Groups 7. Property Rights and Fairness 8. Agency Costs.