Differential Rates, Residual Information Sets and Transactional Algebras

Documento de Trabajo nro. 256

23 Pages Posted: 17 Sep 2007

Multiple version iconThere are 2 versions of this paper

Date Written: February 2004

Abstract

The purpose of this paper is to model differential rates over residual information sets, so as to shape transactional algebras into operational grounds. Firstly, simple differential rates over residual information sets are introduced by taking advantage of finite algebras of sets. Secondly, after contextual sets and the relevant algebra of information sets is suitably fashioned, generalized differential rates over residual information sets are expanded on, while a recursive algorithm is set forth to characterize such rates and sets. Thirdly, the notion of transactional algebra is presented and heed is given to the costs of running such structure. Finally, an application to financial arbitrage processes is fully developed within a transactional algebra, setting up arbitrage returns net of transaction costs, establishing boundary conditions for an arbitrage to take place, and finally allowing for a definition of what should be meant by financial arbitrage within a transactional algebra.

Keywords: differential rates, residual information sets, transactional algebras, arbitrage

JEL Classification: G10, G12, G14

Suggested Citation

Apreda, Rodolfo, Differential Rates, Residual Information Sets and Transactional Algebras (February 2004). Documento de Trabajo nro. 256, Available at SSRN: https://ssrn.com/abstract=1014428 or http://dx.doi.org/10.2139/ssrn.1014428

Rodolfo Apreda (Contact Author)

University of CEMA ( email )

Department of Finance Room 612
Buenos Aires, C1054AAP
Argentina
5411 6314 3000 (Phone)
5411 4803 0429 (Fax)