Differential Rates and Transaction Costs: A Toolkit for Practitioners, Accountants and Financial Economists

University of Cema, Buenos Aires Working Paper No. 166

23 Pages Posted: 27 Oct 2000

Date Written: April 2000

Abstract

It is our main concern in this paper to make for the following stages: a) Firstly,stock and flow differential rates will be introduced. Secondly, reverse differential rates are expanded on. Then, the transaction costs function will be featured. As long as we proceed with these issues, fully solved examples are supplied. b) Next, we handle direct applications to financial markets securities. Namely, time deposits, zero coupon bonds, foreign currencies. In each case, not only intuitive acquaintance with the subject is given but foundations and examples as well. The foundations are conveyed by six lemmas which also give computation guidelines to be used in practice. Among the main conclusions we can draw from this research, two of them deserve due attention:

First, microstructure, trading, and information should be given serious regard because they could have the last word when we attempt to pick out the real winners among market securities. Second, differential and reverse differential rates have a say whenever we want to know about what remains of financial rates of returns after transaction costs.

Keywords: Transaction costs, differential rates, financial assets returns

JEL Classification: G12, G14, M41

Suggested Citation

Apreda, Rodolfo, Differential Rates and Transaction Costs: A Toolkit for Practitioners, Accountants and Financial Economists (April 2000). University of Cema, Buenos Aires Working Paper No. 166, Available at SSRN: https://ssrn.com/abstract=240954 or http://dx.doi.org/10.2139/ssrn.240954

Rodolfo Apreda (Contact Author)

University of CEMA ( email )

Department of Finance Room 612
Buenos Aires, C1054AAP
Argentina
5411 6314 3000 (Phone)
5411 4803 0429 (Fax)

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