Differential Rates, Residual Information Sets and Transactional Algebras

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Both current theory and practice in financial markets are undergoing a strong pressure to include recently developed fields of inquiry, namely market microstructure, transaction costs and asymmetric information. This claim has been taking shape after nearly thirty years of worthy research and empirical development that laid sound groundwork to those promising subjects.

The purpose of this book is to introduce a new approach to work out the returns from financial assets. Firstly, by means of the concept of differential rates, which allow the breaking down of the ordinary rate of return into components that are rates on their own. Secondly, residual information sets are built up to match each differential rate with its underlying information.

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Table of Contents

Preface

Chapter 1. Asymmetric Markets and Information Sets; pp. 1-28

Chapter 2. Financial Assets and their Rates of Return; pp. 29-50

Chapter 3. Differential Rates and Residual Information Sets Within a Transaction Costs Structure; pp. 51-83

Chapter 4. The Brokerage of Asymmetric Information; pp. 85-99

Chapter 5. Narrow and Broad Differential Rates and their Residual Information Sets; pp. 101-117

Chapter 6. Transactional Algebras and the Extent of Arbitrage Constraints; pp. 119-148

Chapter 7. Arbitrage and Separation Portfolios Within Transactional Algebras; pp. 149-184

Chapter 8. Enlarged Separation Portfolios and Financial Synthetics Within Transactional Algebras; pp. 185-206

Chapter 9. Conflicts of Interests and Residual Information Sets; pp. 207-224

Chapter 10. A Toolbox for Practitioners; pp. 225-262

Key Review Problems and Self-Test Questions; pp. 263-273

About the Author

Index

Additional information

Binding