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Trend arbitrage, bid-ask spread and market dynamics  [PDF]
Nikolai Zaitsev
Physics , 2006,
Abstract: Microstructure of market dynamics is studied through analysis of tick price data. Linear trend is introduced as a tool for such analysis. Trend arbitrage inequality is developed and tested. The inequality sets limiting relationship between trend, bid-ask spread, market reaction and average update frequency of price information. Average time of market reaction is measured from market data. This parameter is interpreted as a constant value of the stock exchange and is attributed to the latency of exchange reaction to actions of traders. This latency and cost of trade are shown to be the main limit of bid-ask spread. Data analysis also suggests some relationships between trend, bid-ask spread and average frequency of price update process.
Soybean Futures Crush Spread Arbitrage: Trading Strategies and Market Efficiency  [PDF]
John B. Mitchell
Journal of Risk and Financial Management , 2010, DOI: 10.3390/jrfm3010063
Abstract: This paper revisits the soybean crush spread arbitrage work of Simon (1999) by studying a longer time period, wider variety of entry and exit limits, and the risk-return relationship between entry and exit limits. The lengths of winning and losing trades are found to differ systematically, with winning trades significantly shorter on average than losing trades. Exiting trades near the 5- day moving average is shown to improve trade performance relative to a reversal of sign and magnitude from the entry spread. These results lead to trading rules designed to prevent lengthy trades; however, the profitability of trading rules is found to be unstable.
Determinants of Credit Spread Changes: Evidence from the Australian Bond Market
Andrew Lepone,Brad Wong*
Australasian Accounting Business and Finance Journal , 2009,
Abstract: This paper is one of the first to examine the empirical determinants of credit spread changes oncorporate bonds in the Australian market. Eight different credit spread changes are analysedcorresponding to bonds of four different credit ratings and four different maturity ranges. Weinvestigate the explanatory power of several variables derived from structural models ofcorporate default. Also included in the analysis are variables designed to capture the liquiditycomponent of the credit spread. Results indicate that changes in the spot rate and changes in theslope of the yield curve are the most important determinants of credit spread changes. Overall,the model is able to describe a large proportion of the variation in credit spread changes – up to60 percent. The model provides the best fit for credit spreads in well established bond markets.
An Econometric Analysis for the Behavior of the Bid-Ask Spread  [PDF]
H. de la Fuente-Mella, R. Campos-Espinoza, B. Silva-Palavecinos, D. Cademartori-Rosso
Open Journal of Social Sciences (JSS) , 2013, DOI: 10.4236/jss.2013.17001
Abstract:

Information asymmetries are an important element in the functioning of capital markets. An indirect means of measuring information asymmetry is through the spread of stock prices. The purpose of this paper is to identify the explanatory variables and the determinants of the bid-ask spread and to quantify the influence that the actors involved in the brokering of publically offered securities may have over the spread. The methodology used to model the time series for each of the analyzed companies is based on a time series from each of the observed econometric multivariate processes. The analysis shows a significantly negative relationship between the spread and the market-maker size, calculated in terms of both the equity and the stock portfolio; likewise, activity is measured by observing the amount offered for purchase and/or sale.

Arbitrage Analysis of Futures Market with Frictions
有摩擦期货市场的套利分析方法

LIU Hai-long,ZHOU Quan-yi,
刘海龙
,周泉佚

系统工程理论与实践 , 2007,
Abstract: Based on Vignola and Kawallers' cost of carry model,this paper considers an arbitrage analysis method of Cu futures with frictions caused by transaction costs, storage fees,deliver costs,capital gain taxes and margin.First ex ante and ex post non-arbitrage interval models are proposed for Cu futures,which are then used in case studies.Empirical results show: 1) the ex ante non-arbitrage model is of important sense;2) investors have different arbitrage opportunities with different extent due to their difference in costs of capital;3) the difference in arbitrage opportunities also results from capital gain taxes.
Market Middlemen and Determinants of the Price Spread under Competition  [PDF]
Michael K. Wohlgenant
Theoretical Economics Letters (TEL) , 2014, DOI: 10.4236/tel.2014.49106
Abstract: Neoclassical economics is shown to yield predictions consistent with empirical industrial organization models regarding market middlemen behavior. Diminishing marginal returns to use of variable factor inputs produces three important predictions: a) the price spread between the output price and raw material price is positively correlated with output price, b) the raw material quantity is positively correlated with the price spread, and c) the price spread is positively correlated with other variable factor prices. An application to US farm-to-retail price spread time series data shows the consistency of the predictions.
A Harmonic Analysis Solution to the Static Basket Arbitrage Problem  [PDF]
Alexandre d'Aspremont
Mathematics , 2003,
Abstract: We consider the problem of computing upper and lower bounds on the price of a European basket call option, given prices on other similar baskets. We focus here on an interpretation of this program as a generalized moment problem. Recent results by Berg & Maserick (1984), Putinar & Vasilescu (1999) and Lasserre (2001) on harmonic analysis on semigroups, the K-moment problem and its applications to optimization, allow us to derive tractable necessary and sufficient conditions for the absence of static arbitrage between basket straddles, hence between basket calls and puts.
Double Perspective Data Envelopment Analysis: One Approach to Estimate the “LOOP” Arbitrage  [PDF]
Luiz Fernando de Lyra Novaes, Sergio Antao Paiva
iBusiness (IB) , 2010, DOI: 10.4236/ib.2010.24046
Abstract: This paper introduces the application of real estate pricing DP DEA - Double Perspective Data - Envelopment Analysis to solve the LOOP (Law of One Price) arbitrage. A general equilibrium model of real estate values was developed to analyze price variation over digital map, and applied to the urban area of the city of Joinville. The power of real estate locational value assessment using DP-DEA is then compared with the usual MRA - Multiple Regression Analysis using a real case of land data. All computational generated results and data were subsequently geocoded on a GIS - Geographic Information System. The computational generated Price line Map is easily visualized in a real estate value chart that can enhance accuracy when compared to a conventional methodology, also a tool for immediate updates and testing the effects of new developments over urban areas.
Asymptotic proportion of arbitrage points in fractional binary markets  [PDF]
Fernando Cordero,Irene Klein,Lavinia Perez-Ostafe
Mathematics , 2014,
Abstract: A fractional binary market is an approximating sequence of binary models for the fractional Black-Scholes model, which Sottinen constructed by giving an analogue of the Donsker's theorem. In a binary market the arbitrage condition can be expressed as a condition on the nodes of a binary tree. We call "arbitrage points" the points in the binary tree which verify such an arbitrage condition and "arbitrage paths" the paths in the binary tree which cross at least one arbitrage point. Using this terminology, a binary market admits arbitrage if and only if there is at least one arbitrage point in the binary tree or equivalently if there is at least one arbitrage path. Following the lines of Sottinen, who showed that the arbitrage persists in the fractional binary market, we further prove that starting from any point in the tree, we can reach an arbitrage point. This implies that, in the limit, there is an infinite number of arbitrage points. Next, we provide an in-depth analysis of the asymptotic proportion of arbitrage points at asymptotic levels and of arbitrage paths in the fractional binary market. All these results are obtained by studying a rescaled disturbed random walk. We moreover show that, when $H$ is close to $1$, with probability $1$ a path in the binary tree crosses an infinite number of arbitrage points. In particular, for such $H$, the asymptotic proportion of arbitrage paths is equal to $1$.
Network Analysis of Global Influenza Spread  [PDF]
Joseph Chan ,Antony Holmes,Raul Rabadan
PLOS Computational Biology , 2010, DOI: 10.1371/journal.pcbi.1001005
Abstract: Although vaccines pose the best means of preventing influenza infection, strain selection and optimal implementation remain difficult due to antigenic drift and a lack of understanding global spread. Detecting viral movement by sequence analysis is complicated by skewed geographic and seasonal distributions in viral isolates. We propose a probabilistic method that accounts for sampling bias through spatiotemporal clustering and modeling regional and seasonal transmission as a binomial process. Analysis of H3N2 not only confirmed East-Southeast Asia as a source of new seasonal variants, but also increased the resolution of observed transmission to a country level. H1N1 data revealed similar viral spread from the tropics. Network analysis suggested China and Hong Kong as the origins of new seasonal H3N2 strains and the United States as a region where increased vaccination would maximally disrupt global spread of the virus. These techniques provide a promising methodology for the analysis of any seasonal virus, as well as for the continued surveillance of influenza.
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