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      Arbitrage-free exchange rate ensembles over a general trade network

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          Abstract

          It is assumed that under suitable economic and information-theoretic conditions, market exchange rates are free from arbitrage. Commodity markets in which trades occur over a complete graph are shown to be trivial. We therefore examine the vector space of no-arbitrage exchange rate ensembles over an arbitrary connected undirected graph. Consideration is given for the minimal information for determination of an exchange rate ensemble. We conclude with a topical discussion of exchanges in which our analyses may be relevant, including the emergent but highly-regulated (and therefore not a complete graph) market for digital currencies.

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          Author and article information

          Journal
          05 June 2014
          Article
          1406.1547
          d8827f02-c6f4-40b8-b8d5-7edb2cbff354

          http://arxiv.org/licenses/nonexclusive-distrib/1.0/

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          Custom metadata
          91
          6 pages
          q-fin.EC cs.SI q-fin.TR

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