| 来源类型 | Working Paper |
| 规范类型 | 报告 |
| DOI | 10.3386/w26706 |
| 来源ID | Working Paper 26706 |
| Execution Risk and Arbitrage Opportunities in the Foreign Exchange Markets | |
| Takatoshi Ito; Kenta Yamada; Misako Takayasu; Hideki Takayasu | |
| 发表日期 | 2020-01-27 |
| 出版年 | 2020 |
| 语种 | 英语 |
| 摘要 | With the high-frequency data of firm quotes in the transaction platform of foreign exchanges, arbitrage profit opportunities—in the forms of a negative bid-ask spread of a currency pair and triangular transactions involving three currency pairs—can be detected to emerge and disappear in the matter of seconds. The frequency and duration of such arbitrage opportunities have declined over time, most likely due to the emergence of algorithmic trading. When a human trader detects such an arbitrage opportunity and places orders for multiple transactions—two in negative spreads and three in triangular arbitrage—there is no guarantee all of those orders are fulfilled in a fraction of one second. Thus, the arbitrageur has to consider execution risk, when he/she/it detects the emergence of such an opportunity. The novelty of this paper is to show that those arbitrage opportunities were exploitable and executable, before the mid-2000s, even considering the transactions costs and execution risk. After many algorithmic computers were allowed to be connected directly to the EBS transaction platform in the mid-2000s, the frequency of free lunch cases has declined and probabilities of successful executions of all legs for arbitrage declined. We calculate the change in the expected profit of an attempt to execute necessary transactions to reap benefits from arbitrage opportunity. |
| 主题 | International Economics ; International Finance ; Financial Economics ; Portfolio Selection and Asset Pricing ; Financial Markets ; Financial Institutions |
| URL | https://www.nber.org/papers/w26706 |
| 来源智库 | National Bureau of Economic Research (United States) |
| 引用统计 | |
| 资源类型 | 智库出版物 |
| 条目标识符 | http://119.78.100.153/handle/2XGU8XDN/584379 |
| 推荐引用方式 GB/T 7714 | Takatoshi Ito,Kenta Yamada,Misako Takayasu,et al. Execution Risk and Arbitrage Opportunities in the Foreign Exchange Markets. 2020. |
| 条目包含的文件 | ||||||
| 文件名称/大小 | 资源类型 | 版本类型 | 开放类型 | 使用许可 | ||
| w26706.pdf（1460KB） | 智库出版物 | 限制开放 | CC BY-NC-SA | 浏览 | ||
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