Trade Capacity
I have mentioned bounded or finite trades at several points in my discussions. These are trades that have a prescribed potential to produce returns, which is generally known in advance of a manager’s decision to enter into them. This naturally implies a contrast with unbounded trades. With the exception of buy-and-indefinitely-hold approaches to assets that do not mature, such as perpetual bonds, equities, real estate, and various other non-depleting assets that can be held over unlimited periods for their cash flows, all apparently unbounded trades do in fact have a return boundary in one form or another. What I have referred to as trades with bounded returns are those, such as arbitrages, that are inherently bounded ...

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