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) arbitrage opportunities among spot currency exchange rates in a foreign exchange market. We obtain sufficient conditions for … excluding the triangular arbitrage opportunities in a market with or without market frictions, i.e. transaction costs. Then we … propose a very efficient computational approach not only to detect triangular arbitrage opportunities in real time but also to …
Persistent link: https://www.econbiz.de/10012921244
We use a standard consumption-based asset pricing model incorporating conditioning information to explain the risk-return profile of currency carry trade portfolios. We use a scaled stochastic discount factor instead of scaled or managed portfolio returns as in previous work. Our conditioning...
Persistent link: https://www.econbiz.de/10013120594
We use a standard consumption-based asset pricing model incorporating conditioning information to explain the risk-return profile of currency carry trade portfolios. We use a scaled stochastic discount factor instead of scaled or managed portfolio returns as in previous work. Our conditioning...
Persistent link: https://www.econbiz.de/10013101597
Short lived arbitrage opportunities arise when prices adjust with a lag to new information. They are toxic because they … expose dealers to the risk of trading at stale quotes. Hence, theory implies that more frequent toxic arbitrage opportunities … triangular arbitrage. As predicted, illiquidity is higher on days when the fraction of toxic arbitrage opportunities and …
Persistent link: https://www.econbiz.de/10010499534
as periods in which substantial deviations from arbitrage parities take place. In particular, we focus on deviations from … the triangular arbitrage parity for exchange rate triplets from a cointegration perspective. Due to increasing attention … fiat currencies. We do not find evidence for substantial deviations from the triangular arbitrage parity when only …
Persistent link: https://www.econbiz.de/10012619980
as periods in which substantial deviations from arbitrage parities take place. In particular, we focus on deviations from … the triangular arbitrage parity for exchange rate triplets from a cointegration perspective. Due to increasing attention … fiat currencies. We do not find evidence for substantial deviations from the triangular arbitrage parity when only …
Persistent link: https://www.econbiz.de/10012251074
Persistent link: https://www.econbiz.de/10014390295
The failure to empirically prove uncovered interest rate parity conditions seems to be related to the presence of risk premia on foreign currencies. Recent studies suggest that either consumption- or currency-return-based pricing factors explain the cross section of foreign currency portfolio...
Persistent link: https://www.econbiz.de/10013142105
State-of-the-art stochastic volatility models generate a 'volatility smirk' that explains why out-of-the-money index puts have high prices relative to the Black-Scholes benchmark. These models also adequately explain how the volatility smirk moves up and down in response to changes in risk....
Persistent link: https://www.econbiz.de/10014205554
We sort currencies by countries' consumption growth over the past four quarters. Currency portfolios of countries experiencing consumption booms have higher Sharpe ratios than those of countries going through a consumption-based recession. A carry strategy that goes short in countries that are...
Persistent link: https://www.econbiz.de/10009752999