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AAIM
2005
Springer

Computation of Arbitrage in a Financial Market with Various Types of Frictions

13 years 9 months ago
Computation of Arbitrage in a Financial Market with Various Types of Frictions
Abstract. In this paper we study the computational problem of arbitrage in a frictional market with a finite number of bonds and finite and discrete times to maturity. Types of frictions under consideration include fixed and proportional transaction costs, bid-ask spreads, taxes, and upper bounds on the number of units for transaction. We obtain some negative result on computational difficulty in general for arbitrage under those frictions: It is NP-complete to identify whether there exists a cash-and-carry arbitrage transaction and it is NP-hard to find an optimal cash-and-carry arbitrage transaction.
Mao-cheng Cai, Xiaotie Deng, Zhongfei Li
Added 26 Jun 2010
Updated 26 Jun 2010
Type Conference
Year 2005
Where AAIM
Authors Mao-cheng Cai, Xiaotie Deng, Zhongfei Li
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