Dynamic Arbitrage Gaps for Financial Assets in a Non-linear and Chaotic Price Adjustment Process

In this paper we are concerned with the existence of a dynamic arbitrage gap that evolves out of an adjustment process for disequilibrium prices, within a complex dynamics framework which takes into account the market microstructure and transactions costs. Although this gap exhibits non linear and chaotic behavior, it doesn’t preclude effective arbitrage transactions from taking place in real markets. This dynamic arbitrage gap depends upon a truly financial gap that accounts for unexpected events and superior information on the professional dealers´side. In this way, we can learn much more about dynamical adjustment processes from financial assets, making the arbitrage gap instrumental in setting about real arbitrage positions, paving thus an empirical track open to quasi-stochastic simulations which could be run by econometricians in the near future