Abstract
This chapter considers buying and selling transactions and arbitrage based on the Principle of Exchange and the Equivalence Relation. Since money has emerged and price can be observed objectively, buying and selling can be conducted by referring to objective indexes. In this instance, “evaluation” has to be explicitly distinguished from prices. It is important for executing buying and selling transactions that there be a different “evaluation” formed by each buying party and selling party. Arbitrage is defined as the use of differences in exchange rates to earn a profit. Presenting specific cases with respect to these phenomena, this chapter considers the stability and instability of prices in financial markets and product markets based on the formation of “evaluations” and the function of arbitrage.
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Notes
- 1.
- 2.
According to Hayek, exchange originates in donation. He presumes that exchange was started by placing a gift on the border between the domains of mutual parties. See Hayek (1973) p.82.
- 3.
See Hayek (1988) Chap. 2.
- 4.
Marketability includes exchange easiness, separation easiness, easiness in quality preservation, and scarcity. See Menger (1923) Chapter.9.
- 5.
See Menger (1923) Chapter.9.
- 6.
T placed on the left shoulder of the vector symbol
indicates the transpose of the vector a with this mark. - 7.
See Shiozawa (2004).
- 8.
There are some unique terms that express the conditions or characteristics of financial markets. Most of them are not usually used for describing product markets. Bull and bear, liquidity, spread, board thickness, resilience, and quotes are examples of these types of terms. Quotes indicate the asking prices of buying and selling orders appearing on the board.
- 9.
According to Guide to TSE Trading Methodology (Tokyo Stock Exchange 2004): Limit orders are orders at specific prices, meaning that investors have stated that they want to “buy at not more than XX yen, or sell at not less than XX yen.” In other words a limit order represents the lowest/highest price at which the investor is willing to sell/buy (p.8).
- 10.
See Morishima (1984), Chapter 2.
- 11.
See Shiozawa (2017).
- 12.
This system has started since 2015.
indicates the transpose of the vector a with this mark.References
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Shiozawa, Y., Morioka, M., Taniguchi, K. (2019). Exchange and Arbitrage. In: Microfoundations of Evolutionary Economics. Evolutionary Economics and Social Complexity Science, vol 15. Springer, Tokyo. https://doi.org/10.1007/978-4-431-55267-3_7
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