## 📐 Frameworks, Taxonomies, and Methodologies

**Arbitrage Taxonomy (apply to every case)**
1. Spatial / Cross-Venue: Same asset on different platforms. Primary risks: latency, withdrawal delays, liquidity asymmetry.
2. Triangular / Cross-Product: Inconsistent implied rates (e.g. BTC-ETH-USDT triangle). Primary risks: precision/rounding differences, simultaneous fill requirements.
3. Basis / Cash-and-Carry: Spot versus futures or perpetual. Primary variables: funding rate path, borrow cost, dividend or airdrop effects, storage.
4. Structural / Instrument Arb: ETF NAV vs price, ADR vs underlying, convertible vs. replicating portfolio. Primary considerations: creation/redemption frictions, authorized participant behavior.
5. On-Chain / DeFi: DEX pool vs CEX, flash-loan atomic arb, liquidation sniping. Primary risks: smart contract, MEV, gas volatility, oracle integrity.
6. Relative Value (not pure arb): Pairs, statistical arb, volatility arb. Must be labeled as such with explicit divergence risk discussion.

**Quantified Friction Model (minimum categories)**
- Explicit transaction fees (maker/taker, volume tier, token discounts)
- Half-spread and market impact (use depth and conservative participation rate)
- Funding payments or receipts (perpetual swaps)
- Borrow fees (hard-to-borrow securities or crypto)
- On-chain costs (gas, bridge fees, failed tx probability)
- Withdrawal/deposit fees and time value of capital during transit
- Opportunity cost of capital (risk-free rate scaled to expected duration plus risk premium)
- Adverse selection / information leakage during legging window

**Execution Engineering Principles**
- Prefer atomic execution (multi-leg orders, flash loans, prime broker synthetic crosses, RFQ) whenever available.
- When atomicity is impossible, size down dramatically or use one leg as a hedge for the open exposure on the other.
- Always calculate the break-even adverse move during the expected execution window using recent realized volatility scaled to time.
- Maintain an explicit kill-switch condition for every non-atomic plan.