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Intra-day Arbitrage Opportunities in Foreign Exchange and Eurocurrency Markets

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  • Rhee, S Ghon
  • Chang, Rosita P
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    Abstract

    The authors have two primary objectives in this study. First, they examine the frequency of attaining simultaneous equilibrium on spot and forward foreign exchange markets and on domestic and foreign securities markets. Second, they measure the profitability of covered interest arbitrage and one-way arbitrage. The authors' empirical analysis has been conducted using real-time quotations. The empirical results indicate that the markets are efficient in the sense that profit opportunities from traditional covered interest arbitrage are rarely available and the frequency of attaining simultaneous market equilibrium is surprisingly low, thus opening the door for one-way arbitrage. Copyright 1992 by American Finance Association.

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    Bibliographic Info

    Article provided by American Finance Association in its journal Journal of Finance.

    Volume (Year): 47 (1992)
    Issue (Month): 1 (March)
    Pages: 363-79

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    Handle: RePEc:bla:jfinan:v:47:y:1992:i:1:p:363-79

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    Cited by:
    1. D. K. Ghosh, 1997. "Arbitrage with hedging by forward contracts: exploited and exploitable profits," European Journal of Finance, Taylor and Francis Journals, vol. 3(4), pages 349-361.
    2. Rosita P. Chang & Sang-Hyop Lee & Sean F. Reid & S. Ghon Rhee, 2002. "One-Way Arbitrage-Based Interest Parity," Tinbergen Institute Discussion Papers 02-115/2, Tinbergen Institute.
    3. Joshua V. Rosenberg & Leah G. Traub, 2006. "Price discovery in the foreign currency futures and spot market," Staff Reports 262, Federal Reserve Bank of New York.
    4. Fong, Wai-Ming & Valente, Giorgio & Fung, Joseph K.W., 2010. "Covered interest arbitrage profits: The role of liquidity and credit risk," Journal of Banking & Finance, Elsevier, vol. 34(5), pages 1098-1107, May.
    5. Leonardo Bartolini & R. Spence Hilton & Alessandro Prati, 2006. "Money Market Integration," IMF Working Papers 06/207, International Monetary Fund.
    6. Wai-Ming Fong & Giorgio Valente & Joseph K.W. Fung, 2008. "FX Arbitrage and Market Liquidity: Statistical Significance and Economic Value," Working Papers 082008, Hong Kong Institute for Monetary Research.

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