  An investor with constant absolute risk aversion trades a risky asset with
general It\^o-dynamics, in the presence of small proportional transaction
costs. In this setting, we formally derive a leading-order optimal trading
policy and the associated welfare, expressed in terms of the local dynamics of
the frictionless optimizer. By applying these results in the presence of a
random endowment, we obtain asymptotic formulas for utility indifference prices
and hedging strategies in the presence of small transaction costs.
