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. © Springer-Verlag Berlin Heidelberg 2005.
CITATION STYLE
Cai, M., Deng, X., & Li, Z. (2005). Computation of arbitrage in a financial market with various types of frictions. In Lecture Notes in Computer Science (Vol. 3521, pp. 270–280). Springer Verlag. https://doi.org/10.1007/11496199_30
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