Periodic Sequences Of Arbitrage: A Tale Of Four Currencies
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.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 63 (2012)
Issue (Month): 2 (05)
|Contact details of provider:|| Web page: http://www.blackwellpublishing.com/journal.asp?ref=0026-1386|
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=0026-1386|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Osler, Carol L., 2005.
"Stop-loss orders and price cascades in currency markets,"
Journal of International Money and Finance,
Elsevier, vol. 24(2), pages 219-241, March.
- Carol L. Osler, 2002. "Stop-loss orders and price cascades in currency markets," Staff Reports 150, Federal Reserve Bank of New York.
- Engel, C., 1996.
"Accounting for U.S. Real Exchange Rate Changes,"
Discussion Papers in Economics at the University of Washington
96-02, Department of Economics at the University of Washington.
- Andrei Shleifer ad Robert W. Vishny, 1995.
"The Limits of Arbitrage,"
Harvard Institute of Economic Research Working Papers
1725, Harvard - Institute of Economic Research.
- Ross, Stephen A, 1978. "A Simple Approach to the Valuation of Risky Streams," The Journal of Business, University of Chicago Press, vol. 51(3), pages 453-475, July.
- Engel, Charles & West, Kenneth D., 2003.
"Exchange rates and fundamentals,"
Working Paper Series
0248, European Central Bank.
- Charles Engel & Kenneth D. West, 2003. "Exchange rates and fundamentals," Proceedings, Federal Reserve Bank of San Francisco, issue Mar, pages -.
- Charles Engel & Kenneth D. West, 2005. "Exchange Rates and Fundamentals," Journal of Political Economy, University of Chicago Press, vol. 113(3), pages 485-517, June.
- Deardorff, Alan V, 1979. "One-Way Arbitrage and Its Implications for the Foreign Exchange Markets," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 351-364, April.
- Fisher,Franklin M., 1989. "Disequilibrium Foundations of Equilibrium Economics," Cambridge Books, Cambridge University Press, number 9780521378567, May.
- Jonathan Haskel & Holger C. Wolf, 2001.
"The Law of One Price - A Case Study,"
CESifo Working Paper Series
428, CESifo Group Munich.
- Covrig, Vicentiu & Melvin, Michael, 2002. "Asymmetric information and price discovery in the FX market: does Tokyo know more about the yen?," Journal of Empirical Finance, Elsevier, vol. 9(3), pages 271-285, August.
- Owen A. Lamont & Richard H. Thaler, 2003. "Anomalies: The Law of One Price in Financial Markets," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 191-202, Fall.
- Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
- Alan M. Taylor, 2000.
"A Century of Purchasing-Power Parity,"
NBER Working Papers
8012, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:bla:metroe:v:63:y:2012:i:2:p:250-294. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.