Periodic Sequences of Arbitrage: A Tale of Four Currencies

Rod Cross, Victor Kozyakin, Brian O'Callaghan, Alexei Pokrovskii and Alexey Pokrovskiy

Papers from arXiv.org

Abstract: This paper investigates arbitrage chains involving four currencies and four foreign exchange trader-arbitrageurs. In contrast with the three-currency case, we find 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.

Date: 2011-12
New Economics Papers: this item is included in nep-mon
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Published in Metroeconomica 63:2 (2012), pp. 250-294

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http://arxiv.org/pdf/1112.5850 Latest version (application/pdf)

Related works:
Journal Article: PERIODIC SEQUENCES OF ARBITRAGE: A TALE OF FOUR CURRENCIES (2012)
Working Paper: Periodic Sequences of Arbitrage: A Tale of Four Currencies (2010)
Working Paper: Periodic Sequences of Arbitrage: A Tale of Four Currencies (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1112.5850

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