This paper sets forth the foundations for a transactional approach for the performance of arbitrage in foreign exchange … markets. Firstly, we review both the standard model of financial arbitrage and the so-called covered-interest arbitrage … expand on its main tools of analysis, namely differential rates, residual information sets, arbitrage gaps and transaction …

the costs of running such structure. Finally, an application to financial arbitrage processes is fully developed within a … transactional algebra, setting up arbitrage returns net of transaction costs, establishing boundary conditions for an arbitrage to … take place, and finally allowing for a definition of what should be meant by financial arbitrage within a transactional …

Although the standard trading arbitrage model provides with simple settings and adjustment mechanisms so as to take … profit whenever an arbitrage opportunity comes up, empirical evidence has been piling up showing that this point of view … standard financial arbitrage model from being functional to real markets environments. To overcome such drawbacks, this paper …