Transaction fee
Let’s consider the trading fee ɛ (ɛ ~0.003) impact with its four possible use cases, as follows:
Buy X:
If a trader wants to buy amount 0<ΔX<Xc:
he should pay:
If a trader wants to sell amount ΔY>0:
he will receive:
Sell X:
If a trader wants to buy amount 0<ΔY< Yc, he should pay:
If a trader wants to sell amount ΔX>0, he will receive:
Implementing fees will change the optimal arbitrage strategy as follows:
If q>1 and f(q)<1/(1+ɛ), the buy strategy would be:
if q<1 and f(q)> 1+ɛ, the sell strategy would be:
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