Periodic Sequences of Arbitrage: A Tale of Four Currencies


Autoria(s): Cross, Rod; Kozyakin, Victor; O’Callaghan, Brian; Pokrovskii, Alexei; Pokrovskiy, Alexey
Data(s)

24/04/2012

24/04/2012

2010

Resumo

This paper investigates arbitrage chains involving four currencies and four foreign exchange trader-arbitrageurs. In contrast with the three-currency case, we fi nd that arbitrage operations when four currencies are present may appear periodic in nature, and not involve smooth convergence to a \balanced" ensemble of exchange rates in which the law of one price holds. The goal of this article is to understand some interesting features of sequences of arbitrage operations, features which might well be relevant in other contexts in finance and economics.

Identificador

http://hdl.handle.net/10943/177

Publicador

University of Strathclyde

Russian Academy of Sciences

University College Cork

London School of Economics and Political Science

Relação

SIRE DISCUSSION PAPER;SIRE-DP-2010-66

Palavras-Chave #Four currencies #Limits to arbitrage #Recurrent sequences #Asynchronous systems
Tipo

Working Paper