Periodic Sequences of Arbitrage: A Tale of Four Currencies
Data(s) |
24/04/2012
24/04/2012
2010
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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 | |
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 |