|
|
| Line 1: |
Line 1: |
| {{Technical|date=August 2013}}
| |
| The '''bid–ask matrix''' is a [[matrix (mathematics)|matrix]] with elements corresponding with exchange rates between the [[assets]]. These rates are in ''physical units'' (e.g. number of stocks) and not with respect to any ''[[numeraire]]''. The <math>(i,j)</math> element of the matrix is the number of units of asset <math>i</math> which can be exchanged for 1 unit of asset <math>j</math>.
| |
|
| |
|
| ==Mathematical Definition==
| |
| A <math>d \times d</math> matrix <math>\Pi = \left[\pi_{ij}\right]_{1 \leq i,j \leq d}</math> is a ''bid-ask matrix'', if
| |
| # <math>\pi_{ij} > 0</math> for <math>1 \leq i,j \leq d</math>. Any trade has a positive exchange rate.
| |
| # <math>\pi_{ii} = 1</math> for <math>1 \leq i \leq d</math>. Can always trade 1 unit with itself.
| |
| # <math>\pi_{ij} \leq \pi_{ik}\pi_{kj}</math> for <math>1 \leq i,j,k \leq d</math>. A direct exchange is always at most as expensive as a chain of exchanges.<ref name="WS02">{{cite journal|last=Schachermayer|first=Walter|date=November 15, 2002|title=The Fundamental Theorem of Asset Pricing under Proportional Transaction Costs in Finite Discrete Time}}</ref>
| |
|
| |
|
| ==Example==
| | Slider WindowWhen you're looking for credible movers, talking with your windows with [http://photobucket.com/images/Windows Windows] and Doors If you have any inquiries regarding in which and how to use garden windows for sale - [http://Unitedreplacementwindows.Decaturilmetalbuildings.com/casement-garden-windows-for-sale-online/ Highly recommended Resource site],, you can call us at the page. . |
| Assume a market with 2 assets (A and B), such that <math>x</math> units of A can be exchanged for 1 unit of B, and <math>y</math> units of B can be exchanged for 1 unit of A. Then the ''bid–ask matrix'' <math>\Pi</math> is:
| |
| | |
| : <math>\Pi = \begin{bmatrix}
| |
| 1 & x \\
| |
| y & 1
| |
| \end{bmatrix}</math>
| |
| | |
| ==Relation to solvency cone==
| |
| If given a bid–ask matrix <math>\Pi</math> for <math>d</math> assets such that <math>\Pi = \left(\pi^{ij}\right)_{1 \leq i,j \leq d}</math> and <math>m \leq d</math> is the number of assets which with any non-negative quantity of them can be "discarded" (traditionally <math>m = d</math>). Then the [[solvency cone]] <math>K(\Pi) \subset \mathbb{R}^d</math> is the convex cone spanned by the unit vectors <math>e^i, 1 \leq i \leq m</math> and the vectors <math>\pi^{ij}e^i-e^j, 1 \leq i,j \leq d</math>.<ref name="WS02" />
| |
| | |
| Similarly given a (constant) solvency cone it is possible to extract the bid–ask matrix from the bounding vectors.
| |
| | |
| ==Notes==
| |
| * The [[bid–ask spread]] for pair <math>(i,j)</math> is <math>\left\{\frac{1}{\pi_{ji}},\pi_{ij}\right\}</math>.
| |
| * If <math>\pi_{ij} = \frac{1}{\pi_{ji}}</math> then that pair is [[frictionless market|frictionless]].
| |
| | |
| ==References==
| |
| {{Reflist}}
| |
| | |
| {{DEFAULTSORT:Bid-ask matrix}}
| |
| [[Category:Mathematical finance]]
| |
Slider WindowWhen you're looking for credible movers, talking with your windows with Windows and Doors If you have any inquiries regarding in which and how to use garden windows for sale - Highly recommended Resource site,, you can call us at the page. .