arXiv research

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 exc…

If financial markets displayed the informational efficiency postulated in the efficient markets hypothesis (EMH), arbitrage operations would be self-extinguishing. The present paper considers arbitrage sequences in foreign exchange (FX) markets, in which trading platforms and information are fragmented. In Kozyakin et …

This study optimizes currency arbitrage using quantum computing methods.

Paper uses GNNs to efficiently detect profitable triangular arbitrage opportunities.

We generalize the results of Bielecki and Rutkowski (2015) on funding and collateralization to a multi-currency framework and link their results with those of Piterbarg (2012), Moreni and Pallavicini (2017), and Fujii et al. (2010b). In doing this, we provide a complete study of absence of arbitrage in a multi-currency…

Graph learning improves FXRP and FXSA with significant statistical arbitrage gains.

Perpetual futures offer leverage without maturity, with prices influenced by funding rates.

Foreign exchange rates movements exhibit significant cross-correlations even on very short time-scales. The effect of these statistical relationships become evident during extreme market events, such as flash crashes.In this scenario, an abrupt price swing occurring on a given market is immediately followed by anomalou…

Develops a new model for cross-currency derivatives pricing.

In a market of deterministic cash flows, given as an additive, symmetric relation of exchangeability on the finite signed Borel measures on the non-negative real time axis, it is shown that the only arbitrage-free price functional that fulfills some additional mild requirements is the integral of the unit zero-coupon b…

We revisit the problem of pricing and hedging plain vanilla single-currency interest rate derivatives using multiple distinct yield curves for market coherent estimation of discount factors and forward rates with different underlying rate tenors. Within such double-curve-single-currency framework, adopted by the market…

For the purpose of elucidating the correlation among currencies, we analyze daily and high-resolution data of foreign exchange rates. There is strong correlation for pairs of currencies of geographically near countries. We show that there is a time delay of order less than a minute between two currency markets having a…

Novel OTT method for cryptocurrency trading offers high annualized profit.

Paper examines pricing and hedging for cross-currency swaps referencing backward-looking rates.

Study analyzes risks and opportunities in blockchain currency markets.

We present a general derivation of the arbitrage-free pricing framework for multiple-currency collateralized products. We include the impact on option pricing of the policy adopted to fund in foreign currency, so that we are able to price contracts with cash flows and/or collateral accounts expressed in foreign currenc…

It is assumed that under suitable economic and information-theoretic conditions, market exchange rates are free from arbitrage. Commodity markets in which trades occur over a complete graph are shown to be trivial. We therefore examine the vector space of no-arbitrage exchange rate ensembles over an arbitrary connected…

In this paper we analyze Gresham's Law, in particular, how the rate of inflow or outflow of currencies is affected by the demand elasticity of arbitrage and the difference in face value ratios inside and outside of a country under a bimetallic system. We find that these equations are very similar to those used to descr…

Siegel's paradox is a fundamental question in international finance about exchange rates for futures contracts and has puzzled many scholars for over forty years. The unorthodox approach presented in this article leads to an arbitrage-free solution which is invariant under currency re-denominations and is symmetric, as…

Detect anomalies in complex networks using topological subspace detectors.

The currency carry trade is the investment strategy that involves selling low interest rate currencies in order to purchase higher interest rate currencies, thus profiting from the interest rate differentials. This is a well known financial puzzle to explain, since assuming foreign exchange risk is uninhibited and the …

Proposes a new method to assess Wrong-Way Risk in cross-currency swaps.

We prove the superhedging duality for a discrete-time financial market with proportional transaction costs under model uncertainty. Frictions are modeled through solvency cones as in the original model of [Kabanov, Y., Hedging and liquidation under transaction costs in currency markets. Fin. Stoch., 3(2):237-248, 1999]…

In this paper, we establish a market model for the term structure of forward inflation rates based on the risk-neutral dynamics of nominal and real zero-coupon bonds. Under the market model, we can price inflation caplets as well as inflation swaptions with a formula similar to the Black's formula, thus justify the cur…

Paper uses VAEs to model yield curves without arbitrage violations.

We give a brief introduction to the Gauge Theory of Arbitrage. Treating a calculation of Net Present Values (NPV) and currencies exchanges as a parallel transport in some fibre bundle, we give geometrical interpretation of the interest rate, exchange rates and prices of securities as a proper connection components. Thi…

In fixed income sector, the yield curve is probably the most observed indicator by the market for trading and fifinancing purposes. A yield curve plots interest rates across different contract maturities from short end to as long as 30 years. For each currency, the corresponding curve shows the relation between the lev…

We study superhedging of contingent claims with physical delivery in a discrete-time market model with convex transaction costs. Our model extends Kabanov's currency market model by allowing for nonlinear illiquidity effects. We show that an appropriate generalization of Schachermayer's robust no arbitrage condition im…

In the paper, we study numerically the projections of the real exchange rate dynamics onto the string-like topology. Our approach is inspired by the contemporary movements in the string theory. The string map of data is defined here by the boundary conditions, characteristic length, real valued and the method of redist…

The gauge theory of arbitrage was introduced by Ilinski in [arXiv:hep-th/9710148] and applied to fast money flows in [arXiv:cond-mat/9902044]. The theory of fast money flow dynamics attempts to model the evolution of currency exchange rates and stock prices on short, e.g.\ intra-day, time scales. It has been used to ex…

The general problem of asset pricing when the discount rate differs from the rate at which an asset's cash flows accrue is considered. A pricing kernel framework is used to model an economy that is segmented into distinct markets, each identified by a yield curve having its own market, credit and liquidity risk charact…

We present a simplistic model of the competition between different currencies. Each individual is free to choose the currency that minimizes his transaction costs, which arise whenever his exchanging relations have chosen a different currency. We show that competition between currencies does not necessarily converge to…

By analyzing the foreign exchange market data of various currencies, we derive a hierarchical taxonomy of currencies constructing minimal-spanning trees. Clustered structure of the currencies and the key currency in each cluster are found. The clusters match nicely with the geographical regions of corresponding countri…

Multifractal detrended cross-correlation methodology is described and applied to Foreign exchange (Forex) market time series. Fluctuations of high frequency exchange rates of eight major world currencies over 2010-2018 period are used to study cross-correlations. The study is motivated by fundamental questions in compl…

In this article we propose a study of market models starting from a set of axioms, as one does in the case of risk measures. We define a market model simply as a mapping from the set of adapted strategies to the set of random variables describing the outcome of trading. We do not make any concavity assumptions. The fir…

We extend Dupire's formula for stochastic interest rates and local volatility.

Develops a three-currency HJM framework for Brazilian credit markets, finding significant credit spread differences between indexed segments.

Bitcoins have emerged as a possible competitor to usual currencies, but other crypto-currencies have likewise appeared as competitors to the Bitcoin currency. The expanding market of crypto-currencies now involves capital equivalent to $10^{10}$ US Dollars, providing academia with an unusual opportunity to study the em…

Abstract framework for cross-currency interest rate contracts.

Brazil proposes a new BRICS trade currency to dominate international trade.

World currency network constitutes one of the most complex structures that is associated with the contemporary civilization. On a way towards quantifying its characteristics we study the cross correlations in changes of the daily foreign exchange rates within the basket of 60 currencies in the period December 1998 -- M…

A large set of daily FOREX time series is analyzed. The corresponding correlation matrices (CM) are constructed for USD, EUR and PLZ used as the base currencies. The triangle rule is interpreted as constraints reducing the number of independent returns. The CM spectrum is computed and compared with the cases of shuffle…

We analyze structure of the world foreign currency exchange (FX) market viewed as a network of interacting currencies. We analyze daily time series of FX data for a set of 63 currencies, including gold, silver and platinum. We group together all the exchange rates with a common base currency and study each group separa…

New digital currency aims for equal wealth distribution.

Hybrid method reveals true currency correlations.

Study on collateral currency impact in differential swaps valuation.

It is well known that traded foreign exchange forwards and cross currency swaps (CCS) cannot be priced applying overnight cash and carry arguments as they imply absence of funding advantage of one currency to the other. This paper proposes a heuristic present value concept for multi-currency pricing and hedging which a…

The study reveals the hierarchical structure of the international FOREX market using currency fluctuation distribution similarities.