Title:
Arbitrage and non-linear taxes
Author(s):
Becker, Marcus; Löffler, Andreas
Year of publication:
2024
Available Date:
2024-11-20T07:37:18Z
Abstract:
Incorporating a progressive income tax into an economic decision problem raises the question whether this tax does not create arbitrage opportunities. We investigate this problem in a riskless (multi-period) economy. With a convex tax function we identify a particular kind of arbitrage (called bounded arbitrage): In this case the gain achievable through arbitrage trade is limited and cannot reach infinity.We are able to give a complete characterisation based on prizes of the traded assets as to whether bounded as well as unbounded arbitrage opportunities will exist.
Part of Identifier:
e-ISSN (online): 1863-6691
Keywords:
No-arbitrage with taxation
Fundamental theorem of asset pricing
Non-constant tax rates
Application of convex optimization problems
DDC-Classification:
330 Wirtschaft
Publication Type:
Wissenschaftlicher Artikel
URL of the Original Publication:
DOI of the Original Publication:
Journaltitle:
Review of Managerial Science
Department/institution:
Wirtschaftswissenschaft
Betriebswirtschaftslehre / Department Finance, Accounting and Taxation (FACTS)
Comments:
Die Publikation wurde aus Open Access Publikationsgeldern der Freien Universität Berlin gefördert.