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On the Extent of Arbitrage Constraints within Transaction Algebras (A non-standard approach)

  • Rodolfo Apreda

Although the standard trading arbitrage model provides with simple settings and adjustment mechanisms so as to take profit whenever an arbitrage opportunity comes up, empirical evidence has been piling up showing that this point of view suffers from many downsides, leaving distinctive issues unresolved. By the same token, similar shortcoming prevent the standard financial arbitrage model from being functional to real markets environments. To overcome such drawbacks, this paper sets forth a new approach that is grounded on transactional algebras, which shapes the arbitrage gaps of return within institutional settings, to give account of market microstructure features and enlarged transaction costs.

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Paper provided by Universidad del CEMA in its series CEMA Working Papers: Serie Documentos de Trabajo. with number 239.

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Date of creation: Jul 2003
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Handle: RePEc:cem:doctra:239
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  1. Haskel, Jonathan & Wolf, Holger, 2001. " The Law of One Price--A Case Study," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(4), pages 545-58, December.
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  5. Nietert, Bernhard & Wilhelm, Jochen, 2001. "Some economic remarks on arbitrage theory," Passauer Diskussionspapiere, Betriebswirtschaftliche Reihe 7, University of Passau, Faculty of Business and Economics.
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  8. Rodolfo Apreda, 2000. "A transaction costs approach to financial assets rates of return," CEMA Working Papers: Serie Documentos de Trabajo. 161, Universidad del CEMA.
  9. Varian, Hal R, 1987. "The Arbitrage Principle in Financial Economics," Journal of Economic Perspectives, American Economic Association, vol. 1(2), pages 55-72, Fall.
  10. Andrei Shleifer & Robert W. Vishny, 2001. "Stock Market Driven Acquisitions," NBER Working Papers 8439, National Bureau of Economic Research, Inc.
  11. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
  12. Dammon, Robert M & Green, Richard C, 1987. " Tax Arbitrage and the Existence of Equilibrium Prices for Financial Assets," Journal of Finance, American Finance Association, vol. 42(5), pages 1143-66, December.
  13. Rodolfo Apreda, 2001. "The Brokerage of Asymmetric Information," CEMA Working Papers: Serie Documentos de Trabajo. 190, Universidad del CEMA.
  14. Flood, Mark D. & Huisman, Ronald & Koedijk, Kees G. & Lyons, Richard K., 2012. "Search Costs: The Neglected Spread Component," Research Program in Finance, Working Paper Series qt5q05g9pt, Research Program in Finance, Institute for Business and Economic Research, UC Berkeley.
  15. Michael M. Knetter, 1997. "The Segmentation of International Markets: Evidence from The Economist," NBER Working Papers 5878, National Bureau of Economic Research, Inc.
  16. Rodolfo Apreda, 1998. "Dynamic Arbitrage Gaps for Financial Assets," CEMA Working Papers: Serie Documentos de Trabajo. 134, Universidad del CEMA.
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