Are there arbitrage gaps in the UK gilt strips market?
AbstractEvidence in financial markets of an opportunity for pure arbitrage, and therefore a violation of the law of one price, is considered an anomaly to be noted. This paper reports an apparent violation of the law of one price between UK government gilts and their separately traded principal and coupon strips over a sample period of nearly 14years. There are persistent price differences, and hence opportunities for arbitrage, after allowance for the bid-ask spread; the strips package tends to be overpriced in relation to the corresponding gilt. The price differences may, in part, be due to a lack of liquidity and stale prices in the strips market.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Banking & Finance.
Volume (Year): 36 (2012)
Issue (Month): 11 ()
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Web page: http://www.elsevier.com/locate/jbf
Gilt; Arbitrage; Anomalies; Law of one price; Market microstructure;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
- G19 - Financial Economics - - General Financial Markets - - - Other
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