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Arbitrage Risk Induced by Transaction Costs

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  • Edward W. Piotrowski
  • Jan Sladkowski

Abstract

We discuss the time evolution of quotation of stocks and commodities and show that they form an Ising chain. We show that transaction costs induce arbitrage risk that usually is neglected. The full analysis of the portfolio theory is computationally complex but the latest development in quantum computation theory suggests that such a task can be performed on quantum computers.

Suggested Citation

  • Edward W. Piotrowski & Jan Sladkowski, "undated". "Arbitrage Risk Induced by Transaction Costs," Departmental Working Papers 17, University of Bialtystok, Department of Theoretical Physics.
    • Handle: RePEc:sla:eakjkl:17
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    File URL: http://alpha.uwb.edu.pl/ep/RePEc/sla/eakjkl/17.pdf
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    References listed on IDEAS

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    1. Piotrowski, E.W. & Sładkowski, J., 2001. "What was the temperature of the Bagsik financial oscillator?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 301(1), pages 441-448.
    2. Edward W. Piotrowski & Jan Sladkowski, "undated". "The Thermodynamics of Portfolios," Departmental Working Papers 2, University of Bialtystok, Department of Theoretical Physics.
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    Cited by:

    1. Szczypińska, Anna & Piotrowski, Edward W., 2009. "Inconsistency of the judgment matrix in the AHP method and the decision maker’s knowledge," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(6), pages 907-915.
    2. Domino, Krzysztof, 2012. "The use of the Hurst exponent to investigate the global maximum of the Warsaw Stock Exchange WIG20 index," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(1), pages 156-169.
    3. Edward W. Piotrowski & Jan Sladkowski & Anna Szczypinska, "undated". "Reinforcement Learning in Market Games," Departmental Working Papers 30, University of Bialtystok, Department of Theoretical Physics.
    4. Pakuła, Ireneusz & Piotrowski, Edward W. & Sładkowski, Jan, 2007. "Universality of measurements on quantum markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 385(1), pages 397-405.

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