On measures of unfairness and an optimal currency transaction tax

Details On measures of unfairness and an optimal currency transaction tax On measures of unfairness and an optimal currency transaction tax

2004-10-25

arxiv.org/abs/math/0410543v3

Mathematics

Probability

minor changes

Scientific paper

The purpose of the present paper is the analysis of a model describing how herd behaviour and self-fulfilling prophecies can influence currency exchange rates, and what the impact of a currency transaction tax would be. These considerations yield a stochastic differential equation that can be studied using the methods of infinitesimal analysis. We will show, using a suitable notion of unfairness for discounted price processes which measures the distance from being a martingale, that the fairest tax rate is the maximal one subject to the condition that it does not affect real-economic speculation.

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