Essays on Frictional Finance

This thesis studies three distinct topics in frictional finance. In contrast to standard asset pricing paradigm built in an ideal setting, investors face various constraints and frictions in practice. For example, investors may not borrow unlimited amount of capital. Also, investors may need to pay transaction costs when they trade stocks, bonds, or derivatives. Hence, this thesis aims to delineate the role of market frictions and portfolio constraints in investors’ decision making. The three essays show that impediments to trade are associated with the pricing of assets.